There are a number of tools in the construction attorney's toolbox to help a subcontractor get paid. One very useful and effective, yet rarely used, tools is the Lien Law Section 8 Demand. Lien Law Section 8 allows subcontractors to serve a demand on the project owner demanding 1) the terms of the contract between the owner and the general contractor; and 2) the amount due, or to become due, on the contract between the owner and the general contractor.
This tool is useful for a few reasons. First, it gets the claim in front of the owner. A properly worded demand will put the owner on notice that the general contractor has not paid the subcontractor and most owners will insist that the subcontractor's claim be satisfied before any further/additional monies will be paid out to the general contractor. Second, it gives you information. Information is a crucial tool when attempting to collect unpaid contract balances. Most subcontractors have heard the excuse that the owner has not paid the general contractor and, thus, the general contractor claims he cannot pay the subcontractor (this is not a defense to the subcontractor's claim under New York law but that is another topic). The Lien Law Section 8 demand will let you know if the general contractor is telling the truth. If the contractor has actually been paid, you now have set up a a Lien Law Article 3A trust fund diversion claim. If he has not been paid, you know there is a fund to which you can attach a mechanic's lien. The third, and perhaps most powerful, thing that the Lien Law Section 8 demand does is potentially put the owner on the hook for the unpaid contract balance. Pursuant to Lien Law Section 8, when an owner fails to respond to a Lien Law Section 8 demand the owner becomes liable for the unpaid contract sums.
The Section 8 demand is only one tool to help contractors get paid. Finding counsel familiar with the Lien Law and construction law in New York is vital to maintaining a successful construction business in New York. If your attorney doesn't know the options available to contractors then he or she is of little use to you.
Vincent T. Pallaci is a New York construction attorney. For more information please visit us on the web at http://www.nyconstructionlaw.com/ or e-mail me at vtp@nyconstructionlaw.com.
is there a certain form that has to be used as the statement of terms under lien law 8
ReplyDeleteThere is no specific form for responding to a Lien Law Section 8 demand in New York. The best way to respond is to read the statute and provide exactly the information that is required under the Statute. When in doubt, always consult a New York construction attorney.
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