C. Who May File A Mechanic'sLien

• Jurisdiction: New York

C. Who May File a Mechanic's Lien

Lien Law § 3 provides that a mechanic's lien for private improvements may be filed by a

contractor, subcontractor, laborer, materialman, landscape gardener, nurseryman or person or corporation selling fruit or ornamental trees, roses, shrubbery, vines and small fruits, who performs labor or furnishes materials for the improvement of real property with the consent or at the request of the owner thereof, or of his agent, contractor or subcontractor. . . . Where [a] contract for an improvement is made with a husband or wife and the property belongs to the other [spouse, or to both the husband and wife, the contracting spouse] shall also be presumed to be the agent of the other, unless such other having knowledge of the improvement shall, within ten days after learning of the contract[,] give the contractor written notice of his or her refusal to consent to the improvement.⁷⁴

Professional engineers, architects and surveyors may also file a lien for services.⁷⁵ However, a lower court also determined that a "professional developer" who provided administrative or supervisory duties for the construction work could not file a mechanic's lien.⁷⁶

The consent required by Lien Law § 3 is not a mere acquiescence by the owner to improvements by a lessee in possession at the lessee's own expense.⁷⁷ There must be some affirmative act by the owner to find consent for purposes of Lien Law § 3.⁷⁸ Where a lease requires that certain improvements or replacements that ultimately inure to the benefit of an owner by the reversion at the end of the term be made by a tenant, the owner's consent to the construction of the improvement may be implied.⁷⁹ When a lease does not require improvements, the owner's overall course of conduct and the nature of the relationship between the owner and the lienor may demonstrate the requisite consent.⁸⁰ In November 2018, the Court of Appeals clarified these rules and stated that to the extent certain appellate division cases have suggested that Lien Law § 3 requires the owner to directly authorize the contractor to undertake the improvements, "they are contrary to our precedents and should not be followed."⁸¹ Therefore, the Practitioner should be mindful of any prior appellate division case that suggest a direct relationship between the property owner and the contractor is required for purposes of consent under Lien Law § 3.

The usual and customary lease covenants generally encountered, which require the lessee to maintain and repair the premises but make no other or specific provisions with regard thereto, are not sufficient to constitute consent under Lien Law § 3 by the property owner to specific improvements ordered by the lessee even if the work is done with the lessor's knowledge.⁸²

In 1985, section 3 of the Lien Law was amended with a new clause permitting a mechanic's lien on real property to be filed by any "trust fund" to recoup labor benefits and wage supplements due laborers.⁸³ This amendment was part of an overall bill primarily affecting prevailing wage compliance and enforcement according to the bill's legislative jacket. (Parenthetically, the bill also amended Lien Law § 5, which similarly permitted mechanic's liens to be filed on behalf of "trust funds" in connection with public improvement contracts.) Subsequently, in at least three court decisions, a New York Supreme Court case venued in Westchester County and two federal Second Circuit Court of Appeals decisions the impact of the new "trust fund" language was curtailed. The three decisions basically held the "trust fund" amendment was subject to federal preemption by the Employee Retirement Income Security Act of 1974 (ERISA).⁸⁴

The federal statute provides in pertinent part that ERISA shall "supersede" any and all state laws insofar as they may now or hereafter relate to any employee benefit plan.⁸⁵ The first reported case is Faeth v. ACA Environmental Sevkos.⁸⁶ In Faeth an electrical contractor was to perform certain work on a renovation project for Toys "R" Us. The contractor failed to pay approximately $49,183.19 in pension and benefit funds to IBEW Local 3 in White Plains. The trustees of these funds filed a Notice of Mechanic's lien in the Westchester County Clerk's Office against the project. Toys "R" Us obtained a bond to discharge the lien. In the lien foreclosure action, the surety (United Pacific) moved for summary judgment. The court noted the issue of whether a fund still exists as to which any lien attached was moot because the court found ERISA preempts the lien law claim. According to the court, in pertinent part:

That there is a clear connection between the lien statute and an ERISA plan cannot be gainsaid; as noted previously, the complaint opens by stating that the plans for which contribution is sought are ERISA plans. Moreover, this Court agrees with the recent holding in Plumbing Indus. Bd. v. L & L Masons, (927 F. Supp. 645), which passed on this very same issue and determined that the Lien Law made specific reference, with specific legal affect, to ERISA plans, thereby giving rise to preemption. This court also agrees with the following from that decision: "this section provides an alternate enforcement mechanism that contradicts ERISA. . . . the lien law creates the obligation to contribute to the fund where such an obligation does not otherwise exist. Specifically, this section allows an ERISA plan to recover unpaid benefits by establishing a lien against proceeds due to a contractor or subcontractor, even if that contractor or subcontractor is not otherwise liable for such benefits under ERISA. Thus, the lien law conflicts with ERISA by permitting a cause of action in circumstances under which a cause of action is not permitted under ERISA. . . . Accordingly, ERISA pre-empts § 5 of the Lien Law." ⁸⁷

The second case, Plumbing Indus. Bd. v. E.W. Howell Co., Inc., is an opinion written by Circuit Judge Cardamone in which the court considered whether Lien Law § 5 is preempted by ERISA.⁸⁸

After reviewing the legislative history of the new amendments to Lien Law §§ 3, 5 as previously noted, the court discussed the fact it differed with the lower Court as to whether the State statute actually referred only to "ERISA" plans. It determined the statute could apply to ERISA plans or non-ERISA plans and therefore could not be preempted.⁸⁹ However, it found the statute set up an "alternative to the enforcement mechanism" established by ERISA which according to the United States Supreme Court was to be the exclusive forum for rights guaranteed under ERISA.⁹⁰ The ERISA statute set up six default procedures to enforce pension trust fund compliance.⁹¹ The new Lien Law § 5 provision authorized an additional method—it requires the general contractor, absent any ERISA requirement that he do so, to assume responsibility for the subcontractor employer benefit obligations. According to the Court that provision impermissibly added to the extensive list of parties responsible for an employer's benefit obligation and therefore, it could not stand.⁹² Were states permitted to supplement Congress' enforcement procedures, Congress' policy choices would be undermined. As a consequence the Union trustees could not enforce the lien filed by its officers when the subcontractor involved did not make appropriate contributions to the trust fund.

In the third case, EklecCo v. Iron Worker's Locals 40, 361 & 417,⁹³ a lien for $1,878,866.79 had been filed by a subcontractor regarding a contract dispute over change orders and extras at a private regional mall (Palisades Center). The subcontractor assigned a portion of lien to the Union funds which were owed contributions. The assignment was never filed. The Union subsequently filed its own distinct lien for the funds due under Lien Law § 3.⁹⁴ The contractor then moved pursuant to Lien Law § 19(6) to dismiss the lien because it was allegedly barred under the preemptive language of ERISA.⁹⁵ The fund then promptly removed the case to the federal Southern District of New York under ERISA.⁹⁶ The contractor then moved for summary judgment dismissing the lien action based on the ground Lien Law § 3 was preempted under ERISA. Judge Brieant citing the Plumbing Industry Board case, supra, stated there was no material...