I often get phone calls from subcontractors and suppliers explaining that they have a mechanic’s lien on a project or are planning on putting a mechanic’s lien on a project but that they have been told by the owner that the general contractor was paid. The logical question is how does the subcontractor verify that the general contractor was actually paid as alleged?
The subcontractor has two options. The first is the demand pursuant to Lien Law Section 76. The subcontractor, as a beneficiary of the trust funds, has the statutory right to request that the general contractor provide it with a verified statement of the trust funds. If the general contractor responds as it is required to do, it will show the subcontractor exactly how much has been received in the trust. The second option is to serve a demand pursuant to Lien Law Section 8. The Section 8 demand allows the subcontractor to demand that the owner of the project provide it with a statement of the total amount left due under the contract with the general contractor. Because this is a formal statutory response, it is very unlikely that the owner would state in the Section 8 response that the general contractor has been paid unless the general contractor was actually paid.
Vincent T. Pallaci is a partner at the New York law firm of Kushnick Pallaci, PLLC where his practice focuses primarily on the area of construction law. He can be reached at (631) 752-7100 or firstname.lastname@example.org