Contractors performing work on Native American land in New York are not subject to New York’s Lien Law and have no lien law rights according to the Third Department’s ruling in Hunt Construction Group v. CIVES Corporation. Since the land belonging to Native American tribes is considered sovereign land apart from the United States, it is no surprise that New York Courts would hold that the Lien Law does not apply. However the interesting part of the decision in Hunt Construction was that because the Lien Law does not apply, New York’s prohibition against pay if paid clauses also does not apply since the pay if paid rule prohibition is based upon the public policy found in New York’s Lien Law.
As most contractors know, the normal rule in New York is that a “pay if paid” clause, which passes the risk of non-payment from the owner on to subcontractors, is not enforceable. Normal pay if paid clauses state that payment to the subcontractor is expressly conditioned upon the general contractor receiving payment from the owner. In other words of the general contractor is not paid by the owner then the subcontractor cannot assert a breach of contract claim against the general contractor. While these clauses are enforced in several states, they are not enforceable in New York. Now though it appears that pay if paid clauses are enforceable within the geographic limits of New York if the work was performed on land belonging to a Native American tribe.
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