A Contractor’s, Subcontractor’s and Supplier’s Step-By-Step Guide to Getting Paid - New York - Webinar

In this blog, presented by SunRay Construction Solutions and Theodore M. Baum, Partner, McElroy, Deutsch, Mulvaney & Carpenter, LLP, construction professionals in New York can learn in detail about paying attention to their contracts, lien rights and bond rights can help them resolve their non-payment issues and get paid successfully while working on private and public construction works.

What Should You Check for in Your New York Contracts?

Whether you are a contractor, subcontractor, or supplier, you all must deal with contracts while working on construction projects. In some instances, you may use your own contract forms, but in some instances, you may have forms imposed on you. This is why it is important that you pay attention to some key elements in your contract.

• If it is your form, then the three key elements that you need to focus on are: dollars, time, and final payment. Make sure that you clearly spell out these important terms in your contract.
• If it is not your form, then the key elements that you need to focus on are: does it clearly outline about the dollars involved, such as, what you are going to be compensated, how are you going to be compensated, are there any notice requirements, what are the timing probations that you need to follow, are there any exclusions included, and what is required to get your final payment.
• The next item that you need to focus on in your contract is lien waiver forms. In many instances, the contracts will include expansive lien waiver forms which means that they have a broad language. A lien waiver typically means that you agree to the payment and are waiving any claim that wasn’t properly preserved before this time. You must ensure that you are reading the lien waiver language thoroughly before agreeing to it.
• Finally, you need to see what the contract says about recovering attorney’s fees. Generally, if there is nothing included in the contract about the attorney’s fees, then you cannot recover it; however, if there is a provision mentioned, then you are eligible for it. Again, you need to check the language used because often the language reads as the ‘prevailing party’ gets the fees.
• Generally, you cannot get your attorney’s fees in breach of contract related to construction projects unless provided for by the statute.

One of the most common questions that construction professionals have with regards to contracts is whether an oral agreement is enforceable? In short, the answer is yes – you don’t have to necessarily have it in writing. However, a lot of times you will find yourselves having the opportunity to do the work only if you agree to the form of contract imposed on you by the other party.  

Sometimes people may be open to negotiating the terms and sometimes they may not. This is why it is vital that you go through the contract in detail and ensure that you are aware of all the terms and requirements outlined in the contract.

How to Secure Your Lien Rights in New York?

Lien rights differ from state to state.

• Public Works – For example, in most of the states, there are no lien rights on public works; however, in New York, lien rights are permitted on public works. The lien rights on public works in New York are permitted only on state jobs, municipal jobs, school jobs, etc. They are not permitted on federal jobs within the state of New York.
• Private Works – The lien rights on private works are like other places but the way you enforce them and the steps that you need to take to enforce the rights will differ from place to place. This is why it is recommended that you do not assume that whatever works in other states will work in New York as well.

• Contractors, Subcontractors, Suppliers – Another thing you must consider is what kind of contract you have and where you are in the contractual chain. Are you the contractor contracting with the owner or a subcontractor contracting with the contractor, are you a supplier to the contractor or subcontractor, etc. Your position in the contractual chain will have an impact on what lien rights you have and how you can enforce them.

How to Get Paid on New York Public Projects?

Lien Rights on Public Works

• Lien Law section 5 talks about the public works: a “person performing work for or furnishing materials to a contractor [or] his subcontractor”. This means that the lien rights exist for:
• Subcontractor
• Sub-subcontractor
• Material supplier to a prime contractor or to a subcontractor, but not lower.
• This means that if you are too far removed from the original contractor, you will probably not have any lien rights.
• Another key point to remember is that a prime contractor does not have lien rights while working on public projects. This is because, when you file a lien on a public work in New York, you are not filing a lien on the property per se, rather you are filing it against the contractual fund that was set aside for the project.  

How to Get Paid on New York Private Projects?

Lien Rights on Private Works

• Lien Law section 5 talks about private works which states that pretty much everyone who provides labor or materials to the project has a lien right.  
• In terms of filing the lien, you have 8 months to file the lien on commercial projects and 4 months on single family residential projects.  

Practical Effect of Lien

• In public works, the lien is considered to be a powerful tool for subcontractors because in a public project, when the public owner receives a lien filed by a subcontractor, they need to hold funds in the ratio of 1:5.
• For example, if the lien amount filed is worth $100,000, then the public owner needs to withhold $150,000 from the next payment due to the contractor.  
• In private works, we use the legal term encumbrance which is an interest in real property. Now, if there was a construction loan which was properly secured and filed, the lien is not going to take priority over the construction financing. However, if it wasn’t done correctly, then the lien can take priority over the construction finance.  
• Finally, whether it is private work or public work, the ultimate way to enforce your lien rights is through foreclosure. So, if you are working on a private construction job and if you are able to prove your lien, then you will be permitted to sell the property and recover your money from the proceeds of that sale.  

How to Secure Your Bond Rights in New York?

A lot of people think about bonds in the same way as liens; however, they are not the same. For example, not every job has a bond, especially in private construction works. Also, the lien and bond rights often overlap but can be different.  

• In a lien situation, there has to be a lienable fund to which the lien can be attached. For example, the owner has paid everything to the contractor except for $100,000 and the subcontractor comes with a $300,000 lien. The lien is only going to be enforceable to the extent of $100,000 because that is all there is left to be paid.  
• Bonds on the other hand are simpler. It doesn’t matter how much the owner has paid the contractor it is not going to impact the ability of the claimant to claim what they are entitled to.

• Depending on the circumstances, we have the Miller Act and the Little Miller Act in public construction projects. The Miller Act is the federal law that applies which requires surety bonding on federal projects in New York.  
• The Little Miller Act basically means the state statutory scheme in New York which is New York State Finance Law 137. This law requires payment bonds to be provided on all private work jobs. The bond is considered as a statutory bond and the rights that you will have been defined by the statute and they cannot be changed by the form of the bond.  
• Next, you have non-statutory bonds on private works and subcontractor bonds. In private work, there is no statute or law that requires a bond on private work. But private owners often will ask their contractors to have a bond in order to protect themselves in the event there is a lien or payment claim from a subcontractor.
• In such instances, the statutory rights are irrelevant and whatever the bond says is relevant. This is why it is highly recommended that if you are on a bonded job, make sure that you get a copy of the bond at the start of the project itself. This is because if there are issues later, it might get hard to get a copy of the bond.  
• Subcontractor bonds exist on private and public work jobs, but once you are at the subcontractor level, it is no longer subject to statutory rules. The rights are going to be defined as per the terms of the bond.
• So, it is important that you understand the payment bond document and educate yourself about the bond rights and requirements.  
• Finally, we have the lien discharge bonds which are entirely different and distinct from a payment bond. A lien discharge bond is typically posted to get rid of lien rights. This is not as bad as it sounds because if somebody posts a lien discharge bond, it typically makes it easier for the lienor to approve and recover their amount.
• Remember that a lien discharge bond is another remedy that can help you get paid.

As construction professionals, you need to bear in mind that just because you don’t have a lien right or a bond right, does not mean that you do not have the right to get paid. Although these rights often expire before your general contract rights, they are valuable tools that can help you get paid. This is why it is important that you keep an eye on all these remedies and stay on top of their respective deadlines to ensure that you do not lose out on your lien and bond rights. Don't risk payment delays! Secure your rights with SunRay's legal experts. Call 800-403-7660 today and get paid what you deserve.

FAQs

What is New York Notice of Intent to Lien Form?

The New York Notice of Intent to Lien Form is a legal document used by contractors, subcontractors, and suppliers in New York to formally notify property owners, general contractors, and other relevant parties of their intent to file a mechanics lien on a property if payment for services rendered or materials provided is not received. This document serves as a warning that legal action may be taken to secure payment for work performed or materials supplied on a construction project.

How to File a New York Preliminary Notice Form - Why You Should Send the Notice?

Prepare the New York preliminary notice form by including essential details such as your name and address, the property owner's information if available, the general contractor's details, a brief description of the services provided, the property location, and a statement indicating your willingness to pursue legal remedies like filing a mechanics lien if payment is not received. Remember, this notice isn't adversarial but rather a professional communication to inform parties of your involvement and lien rights. Deliver the notice to the property owner or general contractor via certified mail, in person, or through other suitable means, ideally at the project's outset, to ensure prompt awareness of your participation and potential lien rights.

Why serve a New York preliminary notice?

Serving a New York preliminary notice is essential to inform property owners and general contractors of your involvement in a construction project, assert your lien rights, and pave the way for prompt payment. This proactive step fosters transparency, reduces payment delays, and enhances communication among project stakeholders, ultimately helping to mitigate disputes and ensure fair compensation for your work or materials provided.

What types of projects are covered under New York’s public bond claim laws?

In New York, the Little Miller Act says that payment bonds are needed for public projects worth $100,000 or more. If a municipality awards several main contracts for a project totaling $200,000 or more, payment bonds are required too. Also, New York allows a lien on contract funds for public improvements.