Legal Question in Construction Law in New York
Mechanics lien for subcontractor
It is my understanding that in New York, a subcontractor cannot sue a property owner if the general contractor does not pay the sub. The sub can, however, attach a mechanics lien against the owner's property. If the sub cannot sue the owner, then how exactly does the sub foreclose on the lien, and how does the owner present a defense? If the owner loses, what happens then? how does the sub get compensated?
2 Answers from Attorneys
Re: Mechanics lien for subcontractor
I suspect that your confusion is due to a misunderstanding of the concept of "privity of contract," in this situation, who has a contract with whom. The sub contracts with the GC who contracts with the owner, but is not himself a party to the contract with the Owner.
Re: Mechanics lien for subcontractor
The sub cannot sue the owner for breach of contract. It can sue the owner to foreclose the mechanic's lien. If the sub wins, and neither the owner nor the general contractor pays the amount ajudicated, there will be a foreclosure sale, published in the newspaper and supervised by a court-appointed referee. The sale is subject to any liens that are ahead of the mechanic's lien (mortgage, real estate taxes), and the proceeds are applied to the costs of the sale and then to all mechanic's lienors, who share equitably depending on the size of their liens. If there is money left over, it goes to the Owner, although it is likely that any prior lienors (mortgagees) will take steps to freeze the surplus money pending their own foreclosure lawsuit.
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