Mechanic’s liens on developments surge in New York City

TRD New York /
Dec.December 04, 2008 11:38 AM

The credit crunch that has made it harder for developers to pay contractors has led to a near-doubling of the number of mechanic’s liens filed in New York City, real estate attorneys said.

The tally of mechanic’s liens increased from an average of 394 per month in 2006 to an average of about 769 over the past three months for construction projects in the five boroughs, according to data from real estate analysis firm PropertyShark.com.

Mechanic’s liens are filed by contractors to publicly establish their claim of payment if they have not been paid or have not been paid in full. The action, filed with the county clerk’s offices, records the claim on the property. A lien makes it more difficult to sell real estate because in general lenders do not want to loan money while outstanding claims exist on a property.

White Plains real estate attorney Ronald Steinvurzel said the lack of financing is the reason for the increase in liens.

“That is the real driving force behind the liens and foreclosure actions. Even if there is a great relationship between the owner and the contractor, if [developers] can’t get money from the bank, they just can’t pay,” he said.

There was an average of 769 liens filed per month between September and November, 2008. The figures for last month run through November 24, according to PropertyShark.com.

In 2006, there was an average of 394 mechanic’s liens filed per month, with a high of 503 in August, according to the data. The following year, there was an average of 442 per month, with October recording the most at 533. The average so far this year is 616 per month. The greatest number of filings was in September, when there were 800.

The PropertyShark.com data is imperfect because it only includes a maximum of one lien per contractor, for each month, per property, among all private building classes except one- and two-family homes in the five boroughs, while there could be more liens filed on a given property.

Steinvurzel represented a New Jersey asbestos abatement contractor who sued Swig Equities for $764,100, at 25 Broad Street in the Financial District, in October, after first filing a lien against the building. At three Manhattan construction projects, Steinvurzel is representing a contractor with two claims greater than $200,000, and another for less than $100,000. His client is considering filing liens on the projects because they have not been paid.

Larry Hutcher, a partner with Manhattan law firm Davidoff, Malito and Hutcher, estimated that his firm has filed 25 percent more liens this year compared to 2007, as developers have stretched payment terms from 30 days to 180 days or more.

Most mortgages contain a provision that liens must be removed within 30 or 60 days or the lender can consider the loan in default, real estate attorneys said.

“The lien generally enables you, as the creditor, to put pressure on the developer,” Hutcher said.


Related Articles

arrow_forward_ios
(Image by Wolfgang & Hite via Dezeen)

Hudson Yards megadevelopment inspires a new line of sex toys

Hudson Yards megadevelopment inspires a new line of sex toys
Cammeby's International Group founder Rubin Schron and, from top: 194-05 67th Avenue, 189-15 73rd Avenue and 64-05 186th Lane (Credit: Google Maps)

Ruby Schron lands $500M refi for sprawling Queens apartment portfolio

Ruby Schron lands $500M refi for sprawling Queens apartment portfolio
Wendy Silverstein (Credit: Getty Images)

Wendy Silverstein, co-head of WeWork’s real-estate fund, is out

Wendy Silverstein, co-head of WeWork’s real-estate fund, is out
From left: SL Green CEO Marc Holliday, Ceruzzi Properties’ Arthur Hooper, the Lipstick Building at 885 Third Avenue and IRSA president Eduardo Elsztain (Getty, Wikipedia, Google Maps)

Lipstick Building ground rent reset leads to appraisal dispute

Lipstick Building ground rent reset leads to appraisal dispute
Knotel CEO Amol Sarva (Sasha Maslov, iStock)

Knotel’s Q2 revenue plunged 20%

Knotel’s Q2 revenue plunged 20%
Heirs unapparent: How RE firms plan — or don’t — for futures without the founder

Heirs unapparent: How RE firms plan — or don’t — for futures without the founder

Heirs unapparent: How RE firms plan — or don’t — for futures without the founder
Ziel Feldman (iStock)

HFZ Capital launches new fund for REIT investing

HFZ Capital launches new fund for REIT investing
Privacy is the newest amenity

Privacy is the newest amenity

Privacy is the newest amenity
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...