Mechanic’s Liens: How N.Y. Executive Orders Related to COVID-19 Affect Filing, Extension and Discharge
The COVID-19 pandemic has brought uncertainty and upheaval to communities and businesses across New York. There is some confusion in the construction industry regarding the effect that the various executive orders issued by Governor Andrew M. Cuomo have on a contractor’s ability to file or extend a mechanic’s lien in a timely manner or a property owner’s ability to discharge any lien filed against his property.
Typically filed by contractors, subcontractors, or suppliers who never received payment for work that they performed or materials that they provided on a particular property, mechanic’s liens are legal documents that essentially reserve the rights of the filer to seek unpaid compensation.
Although certain statutes of limitation have been tolled while New York State is “on pause,” the time constraints for filing mechanic’s liens were not specifically referenced in the executive orders. However, even if tolled, it may still be necessary to file a mechanic’s lien during this time period as real estate closings have not been outright precluded by the executive orders. As a result, it is important to consider the impact of the various orders on the filing of mechanic’s liens and the contractor and owner’s rights.
Deadlines for Filing and Extending Mechanic’s Liens
New York State lien law sets forth specific time limitations for filing mechanic’s liens based upon the type of project being constructed. Generally, a mechanic’s lien “may be filed at any time during the progress of the work and the furnishing of the materials, or, within eight months after the completion of the contract, or the final performance of the work, or the final furnishing of the materials, dating from the last item of work performed or materials furnished” (See Lien Law § 10). With respect to a single-family residence, a lien must be filed within four months after the last date labor or materials were furnished for the project or the completion of the contract. (Id.).
A lien is valid for one year from its filing. Lien Law § 17 provides in pertinent part that: “No lien … shall be a lien for … [more] than one year … unless within that time an action is commenced to foreclose the lien, and a notice of the pendency of such action … is filed or unless an extension to such lien … is filed within one year from the filing of the original notice of lien … No lien shall be continued by such extension for more than one year from the filing thereof.” Notwithstanding, a lien can be further extended pursuant to a court order. The duration of a lien filed against a public improvement is governed by Lien Law § 18.
Discharging Mechanic’s Liens
After the filing of a mechanic’s lien, it may be discharged by depositing money with the county clerk in the county where the lien is filed (Lien Law § 20) or by filing a bond or undertaking with the clerk of the county in which the notice of lien is filed. (Lien Law § 19.4).
Relevant Executive and Administrative Orders
In an attempt to limit the spread of the coronavirus, Governor Cuomo issued various executive orders, including the “New York State on PAUSE,” which directed, among other things, that all non-essential businesses were to suspend in-office personnel functions. The courts and clerks are now only handling “essential” matters.
On March 20, Governor Cuomo in executive order 202.8, tolled certain statute of limitations. Pursuant to this order:
[A]ny specific time limit for the commencement, filing, or service of any legal action, notice, motion, or other process or proceeding, as prescribed by the procedural laws of the state, including but not limited to the criminal procedure law, the family court act, the civil practice law and rules, the court of claims act, the surrogate’s court procedure act, and the uniform court acts, or by any other statute, local law, ordinance, order, rule, or regulation, or part thereof, is hereby tolled from the date of this executive order until April 19, 2020.”
On March 22, 2020, Chief Administrative Judge Lawrence Marks issued administrative order AO/78/20, which sharply curtailed the receipt of filed papers by Unified Court System (UCS ) courts and county clerks in litigation matters. In light of the public health concerns of the coronavirus, and consistent with the governor’s recent executive order suspending statutes of limitations in legal matters, until further notice the courts will only accept filings in matters deemed to be “essential.” The list of essential matters did not address the filing of liens, extensions of liens or the discharge of liens. However, it appears that real estate transactions, including conveyances and real estate broker activities are considered essential during this time period.
Notwithstanding the fact that executive order 202.8 does not specifically reference the time constraints contained in the lien law, arguably the language “or by any other statute, local law, ordinance, order, rule, or regulation” is broad enough to toll the filing or extension of mechanic’s liens. However, tolling may not be sufficient to protect a contractor’s rights as a contractor may lose its mechanic’s lien priority or worse, the subject property may be sold before a mechanic’s lien can be filed.
Potential Steps To Be Taken
In an abundance of caution, a practitioner should attempt to file or extend a mechanic lien with the county clerk where the project is located. For example, at least in Nassau County, at this time, the clerk will be accepting the filing of mechanic’s liens and mechanic’s lien discharges, even though most filings are currently suspended. The Queens County clerk’s office has indicated that with a scheduled appointment it will permit limited emergency filings, including discharge of mechanic’s liens. However, the clerk indicated that a party must demonstrate an emergency situation.
It appears that, at least in these counties, the clerk is treating mechanic’s liens as “essential” in nature. There is a likely logic behind this practice. A mechanic’s lien is notice to the public that there is a claim against the property. The purpose of a mechanic’s lien is to protect the lienor’s interest in the property, as allowed by the lien law. If the clerk did not accept the lien, even if the time to file a lien were extended, the property owner could sell the property (which is currently allowed) before a lien could be filed and the lienor’s rights would be lost. Allowing the filing of the lien protects the lienor’s rights. Similarly, allowing the discharge of the lien protects the property owner’s rights and allows the property to be sold, even as the lienor’s rights are protected.
A practitioner should contact each specific clerk where the property is located to obtain guidance as to whether it will permit the filing of a lien during this time period and, if not, whether an emergency application to the court is warranted.
Christopher E. Vatter is a partner with Jaspan Schlesinger.