April 7, 2016
It may come as a surprise to attorneys engaged in the practice real estate litigation that until very recently, the New York state courts did not address whether a mechanic’s lien filed against a cooperative (co-op) apartment may be extended under New York Lien Law §17 without a court order. On Nov. 13, 2015, this question finally was addressed and answered in the negative by the Supreme Court of the State of New York, New York County, in Hong v. Guillermo N. Gomez Architect (Index No. 158282/2015; Robert R. Reed, Justice). (The author represented the petitioner in the case.)
Statute and Case
Under Lien Law §17, a mechanic’s lien automatically expires one year after it is filed unless an action is commenced to foreclose the lien, and a notice of the pendency of such action is filed, or the lien is properly extended. An automatic one-year extension of mechanic’s liens filed against privately-owned real property may be obtained simply by the filing of a notice of extension of lien, except when the lien is filed against “real property improved or to be improved with a single family dwelling.” Under this exception, Section 17 dictates that “[a] lien on real property improved or to be improved with a single-family dwelling may only be extended by an order of a court of record, or a judge or justice thereof.” See Lien Law §17.
The term “real property improved with a single family dwelling” means property improved with between one and four single family residences” (Cook v. Carmen S. Pariso, 287 A.D.2d 208, 214, 734 N.Y.S.2d 753, 758 (4th Dept. 2001)), and the purpose of the exception in Section 17 is to “limit the period of time [such] real property could be burdened by a mechanic’s lien.” Cook, 287 A.D.2d at 216, 734 N.Y.S.2d at 759.
At issue in Hong was an “extension” notice for a mechanic’s lien filed by the respondent, an architect, against a Manhattan co-op apartment for which he performed work. The architect’s “notice under mechanic’s lien law” filed with the New York County clerk’s office on Feb. 28, 2014, specifically identified the owner’s co-op apartment as the property for which the work had been performed.
In April 2014, shortly after service of the lien notice, the co-op owner bonded the lien, which caused the lien to attach to the bond rather than her apartment. Thereafter, the architect filed an “extension” notice with the New York County Clerk’s Office just one day before the one-year anniversary of the lien filing. He did not commence an action to foreclose its lien or obtain a court order.
The petitioner, a co-op owner, brought a special proceeding seeking an order: (i) discharging, vacating, and cancelling the mechanic’s lien filed by the respondent on Feb. 28, 2014, (ii) discharging, vacating, and cancelling a purported “extension of mechanic’s lien” notice filed by the architect against her apartment on Feb. 27, 2015, and (iii) permitting the co-op owner to cancel her surety bond that she had filed to discharge the lien against her apartment.
The co-op owner took the position that the lien had expired and that the extension notice was not valid to extend the lien because, for purposes of the Lien Law, her co-op apartment qualified as a “single family dwelling” and, therefore, the architect was required, but failed, to obtain a court order to extend his lien.
The main issues in Hong were whether the lien had expired, and whether the extension notice was a valid mechanism to extend the lien.
When the proceeding commenced, the extant case law in New York concerning mechanic’s liens filed against co-op apartments was relatively scant—and remains so to this day. Although no appellate court has yet ruled that a co-op apartment should be treated as a “single-family dwelling” under the Lien Law, the New York state and city trial courts tend to treat them as such, even though a co-op apartment is not itself considered “real property” under New York law and is located within a cooperative building that contains multiple dwellings.
These cases have generally held that the four-month filing period, under Lien Law §10(1), for liens filed against single-family dwellings is applicable to a mechanic’s lien filed against a co-op apartment where the lienor’s work is performed solely for the co-op unit itself, and does not include work that benefits the cooperative building’s entire ownership, such as work performed for the building’s common areas. For example, in In re Abbott, 14 Misc.3d 983, 985, 828 N.Y.S.2d 788, 790 (Sup. Ct. N.Y. Co. Jan. 8, 2007) (Feinman, J.), the Supreme Court held that the subject co-op apartment should be treated as a single-family dwelling for purposes of Lien Law §10(1), which dictates that a mechanic’s lien notice for a single-family dwelling must be filed within four months of the date that the last item of work is performed or materials are furnished.
In Abbott, a mechanic’s lien notice was filed by the respondent-contractor for work performed for owners of a co-op apartment. The contractor had finished its work in December 2004 but did not file its mechanic’s lien notice until July 2005. Although the contractor argued that it performed the work for more than one co-op unit and that its work affected common areas of the building, including the roof, the court rejected the allegations in light of the co-op owners’ undisputed evidence that the co-op apartment was a penthouse duplex consisting of a single co-op unit located on two floors, and that the co-op unit had exclusive use of the roof.
Noting that “[t]here is no appellate authority on this subject,” and relying on Interior Resources International v. Shapiro & Shapiro, NYLJ, March 24, 1992, at 23, col. 1 (Civ. Ct., New York County) (Diamond, J.), in which the Civil Court held that, although located in a multiple-unit dwelling, a co-op apartment, similar to a condominium apartment, is a single-family dwelling and subject to the four-month notice requirement for purposes of the Lien Law, the court in Abbott ruled: “As nothing establishes that respondent worked on more than one dwelling unit, the court is persuaded that the four month time limit for single dwelling units applies. Furthermore, there is no reason that the status of the building as a cooperative rather a condominium should lead to a different result.”
It concluded that the mechanic’s lien was not timely filed within the required four-month filing period under the Lien Law. See also, HamiltonAir Co. v. Gould, 17 Misc.3d 222, 227, 844 N.Y.S.2d 640, 643 (Civ. Ct. N.Y. Co. August 3, 2007) (holding that a mechanic’s lien filed against cooperative apartment within four months after the contractor’s last work on the job was a facially valid lien).
Similarly, in Golds Plumbing & Heating Co. v. North Shore Plumbing Supply Co., 2008 WL 827900, N.Y. Slip Op. 30815(U) (Sup. Ct. N.Y. Co. March 18, 2008), the Supreme Court held that the four-month filing period for single family dwellings is applicable to a mechanic’s lien for work done on a single unit of the cooperative. As in Abbott, the court in Golds relied on Interior Resources International, noting that “except for large scale projects involving liens between general contractors and subcontractors, there is no reason for distinguishing between condominium units and cooperative units in terms of the filing period.”
Decision in ‘Hong’
However, none of these above-mentioned cases directly addressed the proper mechanism for extending a mechanic’s lien filed against a co-op apartment. Nor are there any published opinions by any New York courts on the issue. The question of whether an extension of such lien can be obtained by the mere filing of a statutory extension notice or whether a court order is required to extend the lien was ripe for determination in Hong, where the Supreme Court ruled that, under Lien Law §17, a mechanic’s lien filed against a co-op apartment with regard to work performed solely for that co-op, only can be extended by a court order, and that a statutory extension notice will not suffice.
In Hong, as in Abbott, the architect had argued that its extension notice was effective to extend its lien because (i) the cooperative corporation’s building is a multiple dwelling, and (ii) its work benefitted the entire building and affected its common areas, and not just the owner’s co-op apartment.
Rejecting those arguments and finding that “there is no indication on the notice” on the mechanic’s lien “that the work that was done was for anything other than a single family residence,” the court treated the co-op apartment as a “single family dwelling” under the Lien Law, and held that, as such, Lien Law §17 dictates that a court order is required to extend the lien (unless a timely action to foreclose the lien is commenced). Having failed to obtain a court order or commence a foreclosure action, the architect in Hong failed to extend his lien, which automatically expired one year after it was filed. Notably, the court explained:
The case law to this court’s satisfaction and the Lien Law suggests that you must seek a court order for extension under the Lien Law if you’re not going to institute proceedings to foreclose upon the mechanic’s lien within one year.
This ruling directly determines, for the first time, that, in the absence of a lien foreclosure action, a mechanic’s lien filed with regard to work performed solely for a co-op apartment can only be extended by a court order obtained before the expiration of the one-year anniversary of the lien filing. This ruling is consistent with the overwhelming trend of New York state and city courts to treat residential co-op apartments as single family dwellings under the Lien Law. Undoubtedly, legal practitioners in the areas of lien law, construction, and cooperatives should keep this ruling in mind since it can affect the validity of mechanic’s liens in pending and future cases.
Pamela L. Kleinberg is Counsel in the Commercial Litigation Department of Wilk Auslander LLP. She represented the petitioner in Hong v. Guillermo N. Gomez Architect PC.
Reprinted with permission from the “ISSUE DATE” edition of the “PUBLICATION”© 2016 ALM Media Properties, LLC. All rights reserved.