As my readers know, there are two types of construction Mechanic’s Liens, private improvement and public improvement.
In a private improvement lien the owner’s property is placed in jeopardy. When a mechanic’s lien is filed, it attaches to the owner’s property. The owner cannot sell, refinance, leverage or dispose of the property without addressing the lien. If a foreclosure action is commenced, the ultimate goal is a Judgment in Foreclosure and the sale of the owner’s property.
In a public improvement project, the target is any money being held by the governmental or municipality agency for the account of the general contractor. A general contractor has a claim against the municipality or governmental agency, and the subcontractor has a claim only for whatever money the government or municipality may owe to the general contractor. The ultimate goal is not the property owned by the municipality or government, such as a school or a police station or hospital, etc., but the monetary balance that the agency is holding for the account of the general contractor.
In certain instances, the public agency owns the land but the building that goes up on that land is owned privately. For example, we had that arise with the Marriott Hotel in Uniondale. Mitchel Field was a U.S. Government airport that was “sold” after World War II to Nassau County with the proviso that Nassau County would never relinquish or divest itself of the property.
We also had this situation occur in the movie theatre and hotels in Times Square. In all the scenarios, the public entity owned the land but leased it out to a private developer. The projects were financed by the Industrial Development Administration (IDA), which was the nominal owner of the facility only for financing.
In these cases, a mechanic’s lien could not be filed. The properties were not considered private projects which would allow the real estate to be sold at public auctions. At the same time, they were not public projects funded by a public entity.
To correct that inequity, our learned legislators in Albany created an amendment to the Lien Law that provided as follows:
“Where no public fund has been established for the financing of a public improvement with an estimated cost in excess of $250,000, the Chief Financial Officer or public owner shall require a private entity for whom the public improvement is being made to post, or cause to be posted, a bond or other form of undertaking guaranteeing prompt payment of monies due to the contractor, his or her subcontractors, and to all persons furnishing labor or materials to the contractor or his or her subcontractors in the prosecution of the work on the public improvement.”
To anyone who does business with a tenant of a municipality, this amendment offers a modicum of relief. It does not authorize the filing of a Mechanic’s Lien which, in itself, is strange because the Lien Law provides that a lessee is also considered an “owner”, but it does allow for an avenue for collection.
Never let your lien time run out!
For a free copy of our Sixth Edition pamphlet pertaining to Mechanic’s Liens and Payment Bond Claims, kindly contact me.
