New York’s highest court, the Court of Appeals, recently issued a decision that makes it easier for parties who have gone unpaid after performing work or supplying materials for the improvement of real property to file liens on the property even if they only dealt with a tenant of the property, and not with the actual owner. In Ferrara v. Peaches Café LLC, 32 N.Y.3d 348 (Nov. 20, 2018), the plaintiff performed the electrical build-out work for the defendant restaurant, which leased its space in a shopping plaza owned by co-defendant COR Ridge Road Company LLC (“COR”). The restaurant, Peaches, soon went out of business, still owing the electrician, Ferrara, over $50,000. Ferrara filed a lien against the shopping plaza and served notice on the owner, COR.
The Lien Law gives a right to file liens on real property to parties who are owed money for performing work or supplying materials for the improvement of the property “with the consent or at the request” of the owner. However, numerous intermediate appellate court precedents, dating back over a century, hold that the owner’s “consent” does not mean mere “acquiescence” by the owner, or that the work benefitted the owner. Rather, it requires that (in the words of a seminal 1902 case) the owner either have been an “affirmative factor in procuring the improvement to be made” or have assented to the improvement while “having possession and control of the premises” (which is usually not the case with a tenant’s project). Moreover, in the words of an oft-cited 1916 case, the consent required by the Lien Law “is not a consent given to the tenant, but a consent given to the materialman.” Over time, these pronouncements came to be interpreted increasingly strictly as requiring the owner to have given some affirmative consent directly to the supplier of work or materials, although a few cases held that consent could be implied by a course of conduct by the landlord involving sufficiently extensive hands-on participation in the tenant’s build out.
In Ferrara v. Peaches Café, the Court of Appeals said that these old pronouncements had been over-interpreted. Reaching back to cases before 1902, the Court said that “consent” by the owner, for purposes of the Lien Law, could be established based solely on provisions in the tenant’s lease for the premises. In this case, the lease required Peaches to provide COR with the detailed plans for the restaurant, which COR had the right to revise. The lease contained detailed requirements for the electrical work that was the subject of Ferrara’s lien. Peaches had to complete its build-out and open the restaurant for business in 90 days, at which time the rent would start. Peaches had to stay open seven days a week and the improvements would become part of the realty at the end of the lease. The Court held that these requirements, taken together, established COR’s consent to Ferrara’s work for purposes of the Lien Law, without any need to show direct contact between COR and Ferrara. In contrast, a lease provision that merely authorized improvements by the tenant, or required the tenant to obtain the landlord’s consent before performing any alterations (as opposed to actually requiring the tenant to make the specific improvement) would not constitute “consent” within the meaning of the Lien Law.
If you have any questions on this topic or any other construction law topic, please contact Paul Hellegers at
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Paul M. Hellegers has over 30 years of experience litigating complex disputes in the state and federal courts, as well as before arbitration panels and various administrative tribunals, concentrating in construction-related matters on behalf of design professionals, contractors and project owners, including complex cases involving defective design and workmanship claims; property damage claims; labor law and construction accident personal injury claims; and contract disputes including delay and damage claims, tortious interference claims, change order claims, lien actions, and wrongful termination claims.
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