Recently, I was asked by a colleague to troubleshoot a contract dispute that my colleague’s client has with his contractor, which has resulted in the contractor’s filing of a mechanic’s lien. The mechanic’s lien was filed last spring, but the contractor has not commenced an action to foreclose on the mechanic’s lien. To make matters worse, the contractor’s attorney had ceased responding to my colleague’s correspondence.
Under New York Lien Law Section 17, a mechanic’s lien will expire one year after the notice of lien is filed with the county clerk. The contractor would have to commence an action to foreclosure the lien and file a notice of pendency before the expiration of the one-year period, or the lien will be extinguished. The contractor could also seek an extension of the lien by written request, although the extension is conditioned upon the nature of the property.
So, what happens when the contractor fails to commence an action to foreclosure during this period, but there is still time remaining on the one-year period? The property owner can serve a Section 59 Demand to Foreclosure upon the contractor. This notice must be served upon the contractor (the lienor), requiring that the lienor either commence an action to enforce the lien within a period of no less than 30 days from the date of the notice, or show cause to the court in the county in which the property is situated, why the lien should not be vacated or cancelled. Once this notice is served, the property owner can pursue a special proceeding to cancel the mechanic’s lien under New York Lien Law Section 59, and in this proceeding, the owner must establish proof that the lienor has not commenced an action to foreclose since being served with the notice and proof that the Section 59 notice/demand was served according to the statutory requirements.
In my colleague’s case, she timely and duly served the Section 59 Demand, by personal service, and she duly obtained an affidavit of service from her process server. Additionally, her client deposited the disputed amount sought under the lien with the court, and she prepared an affidavit of her client, stating that no foreclosure action had been commenced by the lienor/contractor.
This Section 59 demand requires a lienor to act upon its lien or discharge it. Either way, it moves the dispute forward because the timeliness of the next steps of the lienor and the owner shall prompt the court to issue a decision as to the validity and lifespan of the lien.
If you are a business owner, a mechanic’s lien can be a powerful tool to use to obtain satisfaction for outstanding balances due for goods and services provided that remain unpaid, so long as the deadlines for enforcement and foreclosure are adhered to. For a property owner, the filing of a lien is not the end of the road – like the Section 59 demand, there are several tools in the owner’s toolkit to challenge the validity of the lien and to force the lienor to pursue to the lien to the fullest extent, lest the lienor waits too long and loses its enforceability.
Disclaimer: The information contained in this post is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls and communications. Contacting us, however, does not create an attorney-client relationship.
