New York Court Case Demonstrates the Importance of Responding to Notices

Mechanic's liens provide subcontractors and suppliers with the leverage they sometimes need to get paid by general contractors and property owners. However, their strength falls and rises with the details as one subcontractor recently discovered.

In the case of Janus VII LLC v. Par Plumbing Co., Inc., the property owner, Janus VII LLC, served Par Plumbing Co., Inc., with a notice to either enforce its mechanic's lien or to demonstrate why the lien should not be canceled. Par Plumbing had 30 days to respond; however, it did not. Janus then motioned the courts to have the mechanic's lien dismissed, and the Supreme Court of the State of New York, New York County, ruled in its favor. The court noted that the owner's notice aligned with New York's lien statute and that Par Plumbing failed to support its claim that the notice was not properly served. The plumbing company also acknowledged that it had not responded to the notice because of a pending action against the property owner by the general contractor that had employed Par Plumbing. However, Par Plumbing had never requested to be added, as a party, in the general contractor's pending action.

If Par Plumbing had responded prior to the expiration of the 30-day notice, the outcome could have been much different, said Connie Baker, CBA, director of operations for NACM STS. "When served a 'Notice to Commence Action to Enforce Lien,' the recipient should seek legal counsel to make sure the appropriate action or response is made in a timely manner to maintain lien rights." Although this particular case refers to a New York statute, other states have similar notices, Baker warned.

At any time prior to the expiration of the notice, Par Plumbing could have become a party in the lawsuit with the general contractor. "Other parties that have an encumbrance on a property are normally served a summons that a foreclosure action has been filed giving them rights within an appropriate amount of time to become part of the action," Baker explained. "They also can pull the property up in the county recorder's office to determine if there are other liens filed."

Par Plumbing may still have options, said Kevin Laurilliard, shareholder at O'Connell & Aronowitz, PC (Albany, NY). Because New York enforces the trust fund statute, Par Plumbing could use this law if the general contractor gets paid following its pending action against the owner, which means the general contractor will be "held in trust" to pay its beneficiaries.

Depending on the time elements, Laurilliard also said Par Plumbing could file another mechanic's lien if it is within the eight-month window following the installment of the last furnishing on the project. Or, if Par Plumbing still has the option to join any pending litigation against the owner, it should ask the judge involved with that case to be added as a plaintiff so it may recover some of its losses if the general contractor wins the case.

Despite the remaining options, Par Plumbing's initial mistakes occurred when it decided not to respond to the initial notice, Laurilliard said. "When you get a notice, you can't be cavalier about it."

Cases like these demonstrate the importance of understanding lien laws in states where you do business and not ignoring notices of any kind. Subscribers to the NACM STS Lien Navigator can learn more about state-specific lien laws.

-Bryan Mason, editorial associate 

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Saturday, 02 March 2024

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