Liening for Unbilled Work and Unsigned Change Orders
The Appellate Division both giveth and taketh away—upholding a contractor’s right to file a mechanic’s lien for work it performed but had not yet invoiced for; but also sustaining an owner’s defense of willful exaggeration in connection with the contractor’s filing of a mechanic’s lien for two unapproved change orders.
In Ferro Fabricators, Inc. v. 1807-1811 Park Avenue Dev. Corp., a contractor (“Ferro”) sued an owner (“Park Avenue”) for contract and alleged extra work balances. Park Avenue asserted a counterclaim, and moved for summary judgment, arguing that Ferro had breached the contract through its performance of defective work, that it delayed the project and, that it filed a willfully exaggerated mechanic’s lien.
The claim by Park Avenue against the lien was two-fold. First, it argued that Ferro’s most recently delivered invoice claimed it was only 78% complete, yet it filed a lien for 97% completion. Second, it argued that Ferro also liened for sums for which there was no approved change order. Each, it argued, constituted a willful exaggeration of the lien.
The Appellate Court found disputed issues of fact on both points and held that a full trial was required to resolve the dispute. But in denying the motion for summary judgment based on the conflicting facts, it revealed its opinion of the legal issues involved.
On the first point, the court stated that although Ferro had only tendered an invoice to Park Avenue reflecting completion of 78%, Ferro had demonstrated that it had performed more work thereafter and was prepared to submit a further invoice reflecting completion of 97% of the work. The court did not find the failure to tender the later invoice an impediment to Ferro’s right to recover for the work it had actually performed.
On the second point, the court let stand Park Avenue’s claim that the filing of a lien for unapproved change orders might constitute a willful exaggeration, subjecting the contractor to the dismissal of the lien and damages equal to the amount of the exaggeration.
As this case has shown, willful exaggeration need not be restricted simply to the arbitrary inflation of the amount due. Where a party includes in its lien amounts associated with types of damages to which it was not entitled (e.g., delay damages where the contract has a “no damages for delay” clause; or “verbal” change orders where the contract requires an owner’s written approval), a claim for willful exaggeration might prevail. And with the lienor being subject to damages (as well as attorney’s fees), for the filing of a willfully exaggerated lien, it might be wise to consult an expert before pushing the limits on what is claimed in a lien.
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Further information on mechanic's liens can be found on our blog:
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.