This is the first post in an ongoing series of posts on real estate and construction lending. Check back soon for more posts in our series.
In New York, contractors must be careful to file the correct type of lien to ensure they will be paid for their labor and/or materials. State law provides for two distinct liens: (1) a mechanic’s lien for labor or materials provided for private real property, and (2) a public improvement lien for labor or materials provided for public improvements. Knowing which lien applies is important at the beginning of the filing process, as there are significant differences in the coverage and requirements for each.
For example, one important difference is for what the lien covers. A mechanic’s lien creates a lien over the improvement and the land on which it sits. A public improvement lien creates a lien over the funds set aside for the improvement by the applicable state or public corporation rather than that public improvement itself. Another difference is when the notice of lien must be filed. Notice for a mechanic’s lien may be filed any time during the performance of the work or within eight months after the contractor last furnishes labor or materials. Conversely, notice may be filed for a public improvement lien any time before the completion of work but not later than thirty days after completion and acceptance by the public entity.
The list below highlights a number of key differences between mechanic’s liens and public improvement liens, however, it is not inclusive of all differences between the two. For more information, please see New York Lien Law §§ 1-11.
Mechanic’s Lien: An improvement of real property not belonging to the state or a public corporation, which is defined as any municipal corporation or a district corporation or a public benefit corporation (§2(8) and §3)
Public Improvement Lien: An improvement of real property belonging to the state or a public corporation (§2)
Mechanic’s Lien: Upon the real property improved/to be improved and upon the improvement (§3)
Public Improvement Lien: Upon the moneys of the state or public corporation provided for the improvement (§5) (i.e. not the property or the improvement)
Name of Notice
Mechanic’s Lien: Notice Under Mechanic’s Lien Law for Account of Private Improvement
Public Improvement Lien: Notice Under Mechanic’s Lien Law for Account of Public Improvement
When to File Notice of Lien
Mechanic’s Lien: May be filed at any time during the progress of the work/furnishing of the materials or within eight (8) months after the final performance of the work/final furnishing of the materials (§10)
Public Improvement Lien: Must be filed at any time before the construction/demolition of a public improvement is completed and accepted by the state/public corporation, and within thirty (30) days after such completion and acceptance (§12) [Note: The statute does not explicitly define what constitutes “acceptance.” As a practical matter, it is likely that the contract for the public improvement will include a more concrete definition of “completion and acceptance.”]
Contents of Notice of Lien
Mechanic’s Lien: Must include a description sufficient for identification of the property subject to the lien (§9)
Public Improvement Lien: Must include a description of the public improvement and of the contract for the public improvement (§12)
Where to File Notice of Lien
Mechanic’s Lien: With the clerk’s office of the county where the property is situated (§10)
Public Improvement Lien: Must be filed in two places:
- With the head of the department having charge of the public improvement, and
- With either the state comptroller or the public corporation’s financial officer that is charged with the custody and disbursements of the funds for the public improvement (§12)