Advice on Consent: Holding a Landlord Liable on a Lien Filed for Tenant Work
One who furnishes work, labor, or services in the improvement of real property may file a mechanic’s lien for the fair and reasonable value of the work provided. The lien can be filed against the property and its owner. But when the work is performed for a tenant in a larger building, it is the tenant who is deemed the “owner” under those circumstances. But is the landlord also liable to the contractor who did work only for the tenant?
This issue has remained unclear for many years. Lien Law §3 provides that “one who performs labor or furnishes materials for the improvement of real property with the consent or at the request of the owner thereof,…” shall have a lien for the value of the work. When a contractor works solely for a tenant, has the landlord given its consent?
The appellate courts in one part of the state consistently held that the landlord’s knowledge and acquiescence in the work constituted consent. After all, the landlord had its engineers review the plans and might have made the tenant sign an alteration agreement. The landlord ends up with the improved premises after the tenant moves out.
But courts in another part of the state held that more was required of the landlord to establish its consent. Absent a direct relationship between the landlord and the contractor, there had to be some other affirmative act by the landlord--not just “mere acquiescence.” This “affirmative act” came to be associated with a promise by the landlord to pay for the work if the tenant did not (something rarely to be found). After all, why should the landlord be saddled with liability for the cost of a tenant’s new kitchen or a renovated ground floor commercial space?
Recently, the Court of Appeals settled the split by ruling that the “affirmative act” can be found in the lease itself when it requires specific improvements to the property. No direct relationship is necessary between the landlord and the contractor to render the landlord liable for amounts sought by the lien. If the lease requires a tenant to perform construction work (e.g., when a new restaurant signs a lease for the ground floor space) the landlord is likely to be deemed to have given its consent and be liable to an unpaid contractor that files a lien.
Query whether a landlord will be found to be similarly liable where the lease merely permits (rather than mandates) improvements, but involves the landlord and its design professionals in approving the scope and nature of the work, and imposes conditions on its performance and completion. Will a court find that to be sufficient consent?
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Further information on mechanic's liens can be found on our blog:
Filing Proof of Service - No Wiggle Room
Owner's Payment to GC is Absolute Defense to Sub's Mechanic's Lien Claim
Liening for Pre-Construction Services? Yes and No.
Another Mechanic's Lien Bites the Dust
Better Early Than Never: Can You File a Mechanic's Lien too Soon?
What Can You Lien For? And What Not?
You Must Renew a Bonded Lien, Or Else
Willful Exaggeration of a Mechanic's Lien - Only Established at Trial
Filing a Mechanic's Lien. Again. And Again.