{"id":897186,"date":"2020-03-12T11:24:46","date_gmt":"2020-03-12T17:24:46","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=897186"},"modified":"2020-03-12T11:24:56","modified_gmt":"2020-03-12T17:24:56","slug":"unfounded-lien-whats-an-owner-to-do","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/unfounded-lien-whats-an-owner-to-do\/","title":{"rendered":"An Unfounded Lien: What\u2019s an Owner to Do? And Can it Recover its Attorneys\u2019 Fees?"},"content":{"rendered":"\n<p>Virginia Trunkes | <a href=\"https:\/\/www.constructionlawzone.com\/2020\/03\/an-unfounded-lien-whats-an-owner-to-do-and-can-it-recover-its-attorneys-fees\/\">Construction Law Zone<\/a><\/p>\n\n\n\n<p>A subcontractor has liened the property even though the owner has paid in full for its work. The general contractor has disappeared. What should an owner do next? And will its attorneys\u2019 fees be recoverable?<\/p>\n\n\n\n<p>In New York, a mechanic\u2019s lien, although filed in the county clerk\u2019s office on the project owner\u2019s land record, secures only to funds:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>owed to the party directly above the lienor: each tier of subcontractors, materialmen, and laborers has its own \u201clien fund,\u201d and pursuit of that is its only recourse; and<\/li><li>that have been approved for payment: if the owner did not by contract or change order consent to the payment sought, that dollar amount is&nbsp;not&nbsp;included in the \u201clien fund.\u201d<\/li><\/ul>\n\n\n\n<p>Thus, if at the time the subcontractor filed the notice of mechanic\u2019s lien, the owner did not owe the general contractor money for work performed, there is no fund to which the subcontractor\u2019s lien can attach, and the lien is void. In such a case, the owner has several options under the Lien Law. &nbsp;It should determine whether the lien is \u201cfacially valid,\u201d&nbsp;<em>i.e.<\/em>, without knowing any facts, the lien, on its face, complies with the statutory requirements. If so, the owner may serve the lienor with a \u201cDemand for Verified Statement,\u201d which seeks detailed information about the items of labor and materials furnished and the terms of the subcontract under which they were furnished. If the lienor fails to provide a responsive statement within five days, the statute sets up a path by which the owner can seek cancellation of the lien in a summary proceeding. If the lienor does timely respond, then with the information provided by the subcontractor, an owner can verify the lienor\u2019s claim.<\/p>\n\n\n\n<p>If, upon the owner\u2019s proof of payment, the subcontractor still refuses to release the lien, the owner need not commence its own lawsuit, or wait for the lien\u2019s expiration or a foreclosure action. Instead, the owner may serve notice on the lienor of a deadline, no less than thirty days, by which the lienor must foreclose the lien or show cause why it should not be canceled. If the subcontractor does not commence the foreclosure action, then by operation of law the lien will have lapsed, and can be summarily discharged.<\/p>\n\n\n\n<p>If the subcontractor does nevertheless commence the foreclosure action, now the owner can move to vacate the lien. Although presumably the owner will show its proof and prevail, there is no statutory mechanism for reimbursement of the owner\u2019s attorneys\u2019 fees.<\/p>\n\n\n\n<p>It is often frustrating for an owner that, except under very limited circumstances, the Lien Law does not authorize it to recover attorneys\u2019 fees in litigation. One of the limited circumstances qualifying for reimbursement of attorneys\u2019 fees occurs when a party demonstrates that a lien was \u201cwillfully exaggerated\u201d (Lien Law \u00a7 39-a). The standard for whether a lien is willfully exaggerated is when the inflated amount cannot be explained by \u201ca mere inaccuracy or honest mistake.\u201d<\/p>\n\n\n\n<p>Instinctively, to an owner, a lien with no basis whatsoever will certainly seem willfully exaggerated to warrant attorneys\u2019 fees! That was&nbsp;not&nbsp;the conclusion in&nbsp;<em>Matter of Endo v. Liebold Contracting, Inc<\/em>., 168 A.D.3d 1048 (2nd Dep\u2019t 2019). There, \u201cafter failing to persuade the [lienors] to remove the mechanic\u2019s lien voluntarily upon proof of payment in full,\u201d the owner commenced a summary proceeding, arguing that the lien was facially invalid (although in doing so, its submission went above and beyond \u201cfacial validity\u201d). The petitioner also sought an award of attorneys\u2019 fees, pursuant to Lien Law \u00a7 39-a.<\/p>\n\n\n\n<p>Case precedent on willfully exaggerated liens makes clear that the issue cannot be decided summarily, but only on summary judgment or after a full trial. That is apparently why the&nbsp;<em>Matter of Endo<\/em>&nbsp;petitioner\u2019s attempt to short-cut the process&nbsp;<em>and<\/em>&nbsp;collect attorneys\u2019 fees was unsuccessful. Although initially the motion court had granted full relief to the petitioner (voiding the lien and awarding attorneys\u2019 fees), on the lienor\u2019s reargument motion, it vacated so much of the order as awarded attorneys\u2019 fees to the petitioner, and denied that relief. The Appellate Division affirmed, citing Lien Law \u00a7 39-a, and the New York court rule authorizing monetary sanctions for frivolous court submissions (22 N.Y.C.R.R. \u00a7 130-1.1), stating only that \u201c[a]n award of attorneys\u2019 fees was not warranted under the circumstances herein.\u201d<\/p>\n\n\n\n<p>While the&nbsp;<em>Matter of Endo<\/em>&nbsp;petitioner was fortunate to obtain a summary discharge of the mechanic\u2019s lien, it did so at its own expense. To trigger the fee-shifting statute of Lien Law \u00a7 39-a, an owner will have to endure a more time-consuming litigation through summary judgment or, worse, trial.&nbsp;<em>Matter of Endo&nbsp;<\/em>serves as a healthy reminder for owners to pick worthwhile battles in discharging meritless mechanic\u2019s liens.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Virginia Trunkes | Construction Law Zone A subcontractor has liened the property even though the owner has paid in full for its work. The general contractor has disappeared. What should an owner do next? And will its attorneys\u2019 fees be recoverable? In New York, a mechanic\u2019s lien, although filed in the county clerk\u2019s office on&hellip; <a class=\"more-link\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/unfounded-lien-whats-an-owner-to-do\/\">Continue reading <span class=\"screen-reader-text\">An Unfounded Lien: What\u2019s an Owner to Do? And Can it Recover its Attorneys\u2019 Fees?<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[10772],"tags":[9895,142,184],"class_list":["post-897186","post","type-post","status-publish","format-standard","hentry","category-mechanics-lien-law","tag-advise-consult","tag-attorneys-fees","tag-mechanics-lien-law","entry"],"jetpack_publicize_connections":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>An Unfounded Lien: What\u2019s an Owner to Do? 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