Article 3A of the Lien Law is a potential nightmare waiting to happen for contractors. Often, the nightmare begins when the contractor is served with a Demand for a Verified Statement under Lien Law Section 76 by a trust beneficiary. If the contractor did not maintain proper records, he or she can quickly slip down the bath to personal liability, punitive damages awards and liability that is not dischargeable in bankruptcy.
However, if proper records were maintained, responding to the Section 76 demand is not all that difficult. Unfortunately, recipients of demands under Section 76 do not always consult with competent counsel and/or with an accountant familiar with the record keeping, and disclosure, requirements of Article 3A.
A proper response to a Lien Law Section 76 verified statement should:
- Identify the trust
- Identify the trustee
- Set forth and identify, with specificity, each and every payment received into the trust including the amount, date and payor.
- Set forth and identify, with specificity, each and every payment made out of the trust fund including the amount, date, payee and reason for payment (i.e. what did the payee provide to the trust)
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