Appellate Court Ruling Reinforces Narrow Avenue for Reducing Excessive Mechanic’s Liens
What recourse does an owner (or other aggrieved party, such as a general contractor who is contractually obligated to remove sub-contractors’ mechanic’s liens) have for removing a mechanic’s lien from the property on which it was filed?
One commonly used option is to procure and file a surety bond with the appropriate County Clerk’s Office, in the amount of 110% of the amount of the lien. The posting of a discharge bond removes the lien from the property and attaches the lien to the bond. However, the bond does not actually extinguish the lien and the lienor may still bring a civil action to recover the amount at issue.
Lien Law 19(6) also permits a party wishing to challenge a lien to bring an expedited action seeking summary discharge of the lien, but summary discharge is only available where there is a “facial defect” in the lien, such as listing the wrong owner or failing to properly describe the property against which the lien is claimed. The general rule is that where extrinsic proof must be considered to determine the validity of the lien, an expedited proceeding under Lien Law 19(6) is not the appropriate procedural mechanism to use.
Aside from these avenues (or, of course, securing release of the lien through payment to the lienor), challenges to a lien must generally be brought in the context of a lien foreclosure action. This includes challenges to the amount of a lien, even if that amount appears clearly excessive.
The Appellate Division, First Department recently reinforced this principle in Pizzarotti, LLC v. FPG Maiden Lane LLC, 129 N.Y.S.3d 771 (1st Dep’t 2020). There, the owner brought an expedited action under Lien Law 19(6) seeking reduction of a mechanic’s lien based on lien waivers provided to the owner during the project. The trial court granted the owner’s motion and reduced the lien from $33,837,618.34 to $3,566,357.42.
The First Department reversed, holding that a “court has no inherent power to vacate, modify or discharge a notice of lien pursuant to Lien Law § 19(6) where there is no defect on the face of the lien.” Instead, “any dispute concerning the lien’s validity must await a trial.”
The appellate court observed that there was a dispute as to whether the lien waivers were effective to release plaintiff’s claims, in light of the parties’ course of dealing during the project—suggesting that in a case with indisputable documentary evidence of release, a court could reduce the amount of a lien in the context of a summary proceeding under Lien Law 19(6).
The better reading of the Pizzarotti decision, however, is that a court simply has no power to discharge or modify a mechanic’s lien—including its amount—in the context of summary proceeding under Lien Law 19(6), in the absence of a facial defect in the lien. Rather, disputes concerning the propriety of the amount of the lien must be resolved in the context of a lien foreclosure action brought by the lienor.
Practice Tip: Parties faced with mechanic’s liens that they wish to challenge—but which do not appear to contain “facial defects” remediable in a Lien Law 19(6) summary proceeding—should consider serving a “Demand to Foreclose” under Lien Law 59 if the lienor has not yet commenced an action to foreclose the lien. That statute allows the owner (or aggrieved contractor) to serve a written demand on the lienor demanding that the lienor either foreclose on its mechanic’s lien within 30 days of being served with the demand or show cause before a court why the lien should not be vacated.
As the law continues to evolve on these matters, please note that this article is current as of date and time of publication and may not reflect subsequent developments. The content and interpretation of the issues addressed herein is subject to change. Cole Schotz P.C. disclaims any and all liability with respect to actions taken or not taken based on any or all of the contents of this publication to the fullest extent permitted by law. This is for general informational purposes and does not constitute legal advice or create an attorney-client relationship. Do not act or refrain from acting upon the information contained in this publication without obtaining legal, financial and tax advice. For further information, please do not hesitate to reach out to your firm contact or to any of the attorneys listed in this publication.
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