Okay, so I admit that the title of this post is not entirely accurate; in fact, its 100% false here in New York. But, sadly, it is what many misinformed individuals tell me (or rather yell at me) after my client files a mechanic’s lien. I’m not entirely sure where this misinformation came from. Perhaps a sly owner once convinced a contractor to give up his or her lien rights because of an arbitration clause and the legend was born. Or perhaps, more likely, it is the result of people in the construction industry, including attorneys, not actually reading and understanding the New York Lien Law. Regardless of the source, its a fallacy that needs to die out in the construction industry.
After the irate individual on the phone stops yelling at me for filing a “frivolous lien” despite our arbitration clause, I calmly respond that, with all due respect, you don’t know what your talking about. Of course the natural response is more yelling ending with “what authority do you rely on?!” The answer is simple, take a look at Lien Law Section 35:
“The filing of a notice of lien shall not be a waiver of any right of arbitration of a contractor, subcontractor, material man or laborer…”
Not convinced by Lien Law Section 35? Then take a look at Lien Law Section 34:
“Notwithstanding the provisions of any other law, any contract, agreement or understanding whereby the right to file or enforce any lien created under article two is waived, shall be void as against public policy and wholly unenforceable.”
Lien Law Section 35 works very nicely with Lien Law Section 34 to make one thing clear: New York favors a public policy of allowing contractors to protect and secure their right to payments through the filing of a mechanic’s lien. You cannot waive that right (prior to payment) and even if someone tries to force you to do it, that is void under Lien Law Section 34. However, Lien Law Section 35 says you can still proceed to honor that contract and arbitrate the claim without impacting your lien rights.
So the next time you get an irate phone call claiming you cannot file that lien because there is an arbitration clause, politely tell them to go read the Lien Law or, better yet, just pay the claim!