Legal Question in Construction Law in New York

Re: building contractor trouble

First, a small disclaimer. This is not legal advice. Legal advice comes with an invoice as well as with a real meeting and coffee and all them-there bells and whistles.

You need to engage counsel, and pronto.

The contractor can file a mechanic's lien at any time up until eight months after you throw him off the job. (He does not have to wait for you to fire him; he can file the lien rightnow.) The lien would complicate any attempt you make to refinance or sell the building, but it is not impossible to deal with: you can file a bond, or make a cash deposit in court, to have the lien removed, which would enable you to re-fi or sell the building while you fight things out with the contractor. If you have no burning need to re-fi or sell, there's no rush: the contractor would have to initiate a foreclosure action to do anything with the lien, and any lawyer who knows this terrain would insist on a minimum retainer of $10,000 before even opening a foreclosure file. So while the contractor is huffing and puffing about filing a lien, he's actually blowing smoke. (If the building is in your personal name, the lien could put a small hit on your credit rating, so pull a credit report in that case AND FOR PITY'S SAKE GET THE BUILDING OUT OF YOUR NAME AND INTO A CORPORATION OR LLC IMMEDIATELY!)

There are lots of moving parts to a deal of this kind (even a real "simple" deal), and it's safe to say that some of those moving parts are dangerous if you don't know what you're doing. (The danger is financial rather than physical, but it's very real.) Your ability (or not) to tap into the "penalty" clause is one thing that a lawyer will examine, but the very fact that you're calling it a penalty puts things at risk, because the law does not enforce civil penalties for breach of contract. (There are formulas to invoke that can produce the same outcome in the end, but you generally would have needed the advice of counsel to work them into the contract; they are tricky to work with, even for most attorneys unless the attorney has experience in the slightly arcane field of "liquidated damages.")

You need expert advice on whether to terminate the contractor, work with him, or find a middle path.

This is another instance of "pay me now or pay me later." What's true of auto maintenance is true of law: a small amount invested up front during the contract award can reduce the size of the headaches down the road.