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Owners Response to Notice of Lien

Owners Response to Notice of Lien

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When a property owner is informed that a lien has been placed on his or her property by a contractor or subcontractor, it is an attempt to collect the amount by the owner for work done.  Upon receipt of the notice of lien, the owner should stop making payments to the contractor who filed the lien, or withhold enough money to cover the amount of the lien, interest on that amount, and any potential court costs associated with the lien.  Pursuant to Lien Law §4, a property owner’s liability on a lien is limited to the amount of money due to the contractor at the time the owner became aware of the lien, also known as the “lien fund”.  Making further payments after being served with the lien does not decrease the amount of the lien, and does not waive the owner’s liability to the contractor.

One course of action a property owner may take when served with a lien is to demand an itemized statement of the lienor that sets out specifically the labor and materials furnished to complete the project and the terms of the contract under which said labor and materials were furnished.  Such an itemized statement must provided detailed descriptions of labor and materials, and must be verified.  Invoices of materials purchased and handwritten notes about work done on the project that are in dispute are not sufficient to constitute an itemized statement.  In Millar v. Sperry, 254 A.D. 820, 5 N.Y.S.2d 250 (4th Dept. 1938), the court set forth the standard an itemized statement must meet in order to be a proper notice to the property owner.  The statement must specify the type of labor provided, both skilled and unskilled.  The statement must also identify the number of hours worked by each type of laborer and their hourly rates.  It should also provide the types of materials provided, the quantity of these materials, and the cost of each.  Lastly, the statement must set forth the provisions of the contract under which such labor and materials were provided.  Itemization is only required in a lump sum contract that has not been substantially completed.  [1]

Another response to a notice of lien for an owner is to discharge the lien.  Four ways exist by which a lien can be discharged; (1) the lienor discharges the lien, (2) the lien is discharged by a bond or deposit, (3) the lien is discharged because it is defective on its face, or (4) the lien is discharged because it is procedurally defective.  Pursuant to N.Y. Lien Law §19(1) and 21(1), if the lien is paid either before or during a foreclosure action, the lienor is required to furnish a complete or partial satisfaction or release of the lien.   Pursuant to N.Y. Lien Law §19(1) and 21(3), once a foreclosure judgment has been entered, payment of the lien is shown by a satisfaction of judgment.  To discharge a lien, an owner or contractor may file a bond with the clerk of the county in which the lien was filed for 110% of the lien.  [2]  Where a lien is facially defective due to the character of the labor or materials furnished or for a failure to comply with the notice provisions of the relevant lien law, the lien may be discharged by court order upon application by an interested party pursuant to N.Y. Lien Law §19(6) for a private loan, and §21(7) for a public loan.  A lien may also be discharged if it is procedurally defective, ie. it was not filed in the proper county, it was not served within the statutory period, it was not prosecuted in a timely fashion, etc.

[1] Application of Pinckney, 13 A.D.2d 806, 216 N.Y.S.2d 19 (2d Dept. 1961)

[2] N.Y. Lien Law §§ 19(4), 20, 21(5)

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