Failure to Provide Proper Itemization Under Section 38 of the New York Lien Law Fatal to Maintaining a Mechanic's Lien

Legal Alert

May 2, 2019

The New York Lien Law provides broad rights to contractors, subcontractors and materialmen who improve real property. However, the right to file a mechanic’s lien is not without obligation on the lienor who must, within five days of receipt of a demand under Section 38 of the Lien Law, provide a verified, itemized statement detailing the value of the labor and materials that comprise its claimed lien amount. A property owner faced with a lienor who refuses or fails to adequately itemize its mechanic’s lien may bring a petition before the court to seek a proper itemization. If the lienor fails to adequately itemize its lien after the court orders it to do so, the court may vacate and cancel the lien.

In Red Hook 160 LLC v. 2M Mechanical, LLC, Index No. 501742/2019 (Sup. Ct. Kings Co. April 16, 2019), Red Hook 160 LLC (“Red Hook”) made a demand pursuant to Section 38 of the Lien Law that respondent 2M Mechanical, LLC (“2M”) provide a verified itemized statement of its $1,200,000 mechanic’s lien. 2M responded by letter refusing to itemize its lien, prompting Red Hook to file a petition seeking a court order requiring 2M to itemize. At the initial hearing on the petition, the Court issued an Order directing 2M to either itemize its lien or oppose the petition. 2M thereafter provided a one-page itemization of its lien which simply listed the pay applications which totaled the lien amount. Red Hook’s reply argued that 2M failed to properly itemize and requested that the Court discharge the lien. The Court agreed with Red Hook finding that the single-page itemization was insufficient and that 2M had received ample opportunity to itemize its lien and failed to do so. Thus, the Court issued an Order vacating and canceling 2M’s lien.

However, in an interesting turn of events, just two days after the Court discharged its lien, 2M filed an identical second lien against Red Hook’s property. Red Hook promptly filed a motion to vacate the second lien on the basis that the second lien was filed in contravention of the Court’s Order and that to permit the second lien would render Section 38 of the Lien Law meaningless. 2M took the position that the Court Order discharging its first lien was not “with prejudice” and therefore, there was no bar to re-filing a successive lien since 2M was still within the eight-month statutory limitations period for filing a lien. The Court, again, sided with Red Hook holding that Section 38 requires discharge of the lien with prejudice so as to give the statute’s language its intended effect. Thus, the Court vacated and canceled 2M’s second lien with prejudice.