Article 3-A of the New York Lien Law establishes strict legal requirements for how funds received in connection with a construction project must be handled. The law requires that these funds be held in trust and used to pay subcontractors, suppliers, and other beneficiaries before the trustee uses the funds for any other purpose.
Those who receive these funds are called “trustees” and are legally obligated to ensure all funds are properly applied to outstanding payments owed to contractors, subcontractors, laborers, and material suppliers. If they fail to do so, they may be personally liable.
Rights of Beneficiaries
Individuals or entities entitled to receive payment from the trust are known as “beneficiaries.” Under Article 3-A, beneficiaries have several important rights:
- The right to demand and review the trustee’s books and records
- The right to initiate litigation to recover improperly diverted trust funds
- The ability to hold the principals of the trustee personally responsible
Actions to recover diverted trust funds must be brought as class actions. This allows all beneficiaries to be represented collectively by one party, increasing efficiency and reducing costs. Courts are empowered to award attorneys’ fees and, in some cases, punitive damages.
Advantages of Class Action Trust Fund Litigation
Class actions under the Lien Law offer key advantages:
- Legal costs are shared among plaintiffs
- Increased leverage against trustees and corporate officers
- Access to financial records of the contractor or entity that diverted funds
These lawsuits are especially important when mechanic’s lien rights have expired or if the trustee is insolvent. Article 3-A ensures that even in such cases, unpaid beneficiaries still have a legal path to recover what they are owed.
How We Help
At Kushnick Pallaci PLLC, we are experienced in bringing class action claims on behalf of unpaid contractors and suppliers. We understand the intricacies of Article 3-A and know how to hold responsible parties accountable. Whether you are a subcontractor, laborer, or material supplier, we can help you evaluate your trust fund rights and pursue recovery.
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Are You Owed Payment From a Trust Fund?
If you are a beneficiary of a construction trust fund and believe funds have been diverted, we can help you pursue recovery under Article 3-A. Contact Us Today
Call now: (212) 752-7155
