Thursday, October 28, 2010

Abritration Provision in Contract Does Not Prevent Filing of Mechanic's Lien Rules Court

In Cava Construction & Development, Inc. (New York County Index No. 109025/2010) Judge Martin Schoenfeld was confronted with the common situation of what to do with a mechanic's lien when a construction agreement contains a provision requiring arbitration of any disputes between the parties?  Pointing to Lien Law Section 35, Judge Schoeneld noted that "the filing of a notice of lien shall not be a waiver of any right of arbitration of a contractor".  The court therefore held that filing a mechanic's lien did not consitute a waiver of the right to arbitrate the claim and the Court also held that the lien foreclosure action would be stayed pending a determination of the arbitrator. 

You should note that this is a very common situation confronted by contractors.  A mechanic's lien must be extended or foreclosed upon within a certain amount of time to avoid it lapsing.  However, where the contract contains an arbitration provision there is often a problem pursuing the lien foreclosure action in a timely manner.  Therefore, a common practice is to commence the foreclosure action to preserve the mechanic's lien and then move to stay the lien foreclosure proceeding while you arbitrate the claims.  Typically, if the lienor is successful in the arbitration and still is not paid then the lienor can continue the foreclosure action to secure payment through sale of the property. 

Vincent T. Pallaci is a partner at the New York law firm of Kushnick Pallaci, PLLC where his practice focuses primarily on the area of construction law.  He can be reached at (631) 752-7100 or

1 comment:

  1. It nice to see a positive, reasonable outcome in the matter you discuss. Georgia law (and every state with which I am familiar) is very clear about the deadlines in which liens and lien foreclosure actions must be filed. Arbitration and mediation can be a helpful avenue, but their helpfulness would diminish if they could be used to rid the owners' of lien claims.