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Governor Hochul Signs Construction Reporting Pay Act: What You Need To Know

Written by Gregory J. Spaun on . Posted in Legal Alerts.

In recent years, the New York State legislature has been imposing additional requirements on how contractors treat, and pay, their workers. Many of these requirements relate to the payment of prevailing wages, but not exclusively. On September 9, 2026, Governor Hochul signed another one of these requirements, and this one applies to both prevailing wage and non-prevailing wage projects. These requirements go into effect on Tuesday, December 8, 2026.

The Construction Industry Reporting Pay Act enacts two new statutes, Labor Law § 196-e for non-prevailing wage jobs, and § 224-g for prevailing wage jobs. Both of these statutes generally parallel each other in that they both require contractors to pay their workers who report for work a certain minimum pay. For prevailing wage jobs, this minimum is four hours’ pay at the prevailing rate (including supplements), even if the actual time worked is less than those four hours. For non-prevailing wage projects, the pay is for the lesser of the time of the regularly scheduled shift, or four hours. Additionally, when workers are told not to report to work on less than 12 hours’ notice (for instance, when there is no work because of weather, owner or general contractor shutdowns, delivery problems, or emergencies), contractors are required to pay those workers two hours’ pay (which, for prevailing wage jobs, is at the prevailing rate and includes supplements). 

It is important to note that these statutes establish only minimum requirements. If an applicable prevailing wage scale, collective bargaining agreement, or project labor agreement requirement is more generous, those higher requirements control. Stated simply, the new statute does not reduce any obligations already imposed, it simply creates a minimum floor where there are no otherwise applicable requirements.

The takeaway for contractors is to make sure that where they have workers report to a jobsite, they have sufficient work to justify having the worker report. Further, while not mandated by the Act, contractors should seriously consider implementing a time-stamped method of giving and preserving cancellation notices. As liability results from failing to provide timely notice and make the required payment, not simply from failing to document the communication, without such documentation contractors are going to have difficulty proving that timely notice was provided. Another important takeaway is that payments required under § 196-e are expressly deemed wages, while payments under § 224-g are deemed prevailing wages or supplements. Accordingly, a violation may involve more than payment of the underlying two or four hours—it may trigger enforcement actions under the applicable wage-and-hour or prevailing-wage statutes. 

Since this is a new statute, the Department of Labor has not yet promulgated any regulations (as of the initial publication date of September 21, 2026) as to, for instance, what kind of communication will be deemed sufficient when a contractor calls off workers, how the term “promised hourly wage” will be interpreted, or how they otherwise need to document their compliance. So, as always, stay tuned, and reach out to me if you have any questions or would like more information about this, or any other employment-related requirement. I can be reached at gspaun@wbgllp.com, or by phone at (914) 607-6425.

If you would like more information regarding this topic please contact Gregory J. Spaun at gspaun@wbgllp.com or call (914) 607-6425

Utility Interference Costs: Written Agency Direction Can Preserve a Contractor’s Claim

Written by Thomas S. Tripodianos on . Posted in Legal Alerts.

A recent decision in P & T Contracting Corp. v. Consolidated Edison Company of New York, Inc. highlights the importance of documenting responsibility for utility interference work on public projects.

P & T Contracting was replacing lead water lines for the New York City Department of Environmental Protection. During the project, it encountered Con Edison infrastructure near its work area. Con Edison allegedly directed the contractor to excavate around the facilities by hand, increasing the contractor’s costs and reducing productivity.

The contractor sought payment from Con Edison for this additional work. Con Edison moved to dismiss, arguing that it had neither received a direct order from DEP nor entered into an interference agreement with the contractor.

The court denied Con Edison’s motion. The contractor alleged that DEP had directed Con Edison to protect its facilities and that DEP was copied on communications concerning the hand excavation. Because discovery had not yet occurred and the relevant communications were not before the court, the court found that the contractor had sufficiently alleged the possible existence of a direct agency order. The court also permitted the contractor to amend its complaint to provide additional details concerning that alleged order.

The decision does not establish that Con Edison must ultimately pay the contractor. It merely allows the contractor’s claims to proceed through discovery.

Practical Takeaways

A public contractor cannot ordinarily make a utility responsible for interference costs merely by notifying the utility of the project. Responsibility will generally depend upon a direct order from the public agency or an agreement allocating the interference work and its cost.

Before performing utility-related extra work, contractors should:

  • Request a written agency directive identifying the utility’s obligations.
  • Seek a written interference agreement among the contractor, agency, and utility.
  • Give all required contractual notices and expressly reserve payment rights.
  • Confirm who will pay before proceeding, whenever safety and project conditions permit.
  • Separately track labor, equipment, materials, delays, and productivity impacts.
  • Preserve all emails, meeting minutes, field directives, photographs, and daily reports.

The bottom line is straightforward: utility direction alone may not establish payment responsibility. A clear written agency directive or interference agreement remains the best protection against performing costly work without a confirmed source of payment.

If you would like more information regarding this topic please contact Thomas S. Tripodianos at ttripodianos@wbgllp.com or call (914) 607-6440

Receivables Purchase Agreement Enforced Against Contractor and Personal Guarantor

Written by Thomas S. Tripodianos on . Posted in Legal Alerts.

A recent New York decision warns contractors using merchant cash advances or receivables financing: when repayment is genuinely contingent on future receipts, a court may treat the transaction as a purchase – not a loan – and reject a usury defense.

What Happened

In Simply Funding LLC v. Clarkston Complete Renovation LLC, the funder paid the contractor $120,000, less an agreed origination fee, in exchange for $169,200 of future receivables. The contractor authorized weekly ACH withdrawals of $3,845.45, and its principal personally guaranteed performance. After remitting $49,990.85, the contractor blocked further withdrawals. The funder sued for $121,709.15.

The Decision

The court dismissed the contractor’s affirmative defenses and granted summary judgment to the funder. It held that the agreement was not a loan – and therefore was not subject to New York’s usury laws – because:

  • it contained a reconciliation process allowing withdrawals to adjust based on actual receipts;
  • it had no fixed repayment term; and
  • bankruptcy alone was not an event of default.

The court also rejected defenses based on unconscionability, lack of a contract, statute of frauds, lack of standing, failure to mitigate, and unclean hands. The funder’s business records established the funding, partial remittances, and blocked ACH transactions. Judgment could be entered for the amount demanded.

Why This Matters

The decision does not make every receivables purchase agreement enforceable. Courts examine substance, not labels, and the result turns on the agreement’s actual terms and operation. But when repayment is truly contingent and the agreement includes the three features above, a usury defense may fail. A personal guaranty can also expose the business owner directly.

Blocking ACH withdrawals is not a legal strategy. It may trigger default fees, attorneys’ fees, and immediate liability while depriving the business of leverage.

The Bottom Line

Before signing, contractors should have counsel review the cash actually received versus the receivables sold, the reconciliation process, ACH and default provisions, personal guaranties, stacking and cross-default restrictions, attorneys’ fees, and forum provisions. Merchant cash advances may provide fast cash, but the effective cost can be steep and the remedies aggressive. Review the agreement before signing – not after the withdrawals become unsustainable and the lawsuit arrives.

If you would like more information regarding this topic please contact Thomas S. Tripodianos at ttripodianos@wbgllp.com or call (914) 607-6440

A Default Does Not Mean an Automatic Win: Construction Claims Still Require Proof

Written by Thomas S. Tripodianos on . Posted in Legal Alerts.

A recent New York Supreme Court decision, Doka USA, Ltd. v. Highbury Concrete Inc., provides an important reminder for contractors, subcontractors, suppliers, and equipment rental companies: even when the defendant fails to appear, the plaintiff still must prove its claims with competent documentation.

Doka sought more than $900,000 for allegedly unpaid equipment rentals, materials, and services furnished on four New York construction projects. The defendants did not appear, and Doka moved for a default judgment.

The Court granted judgment on breach of contract claims involving three projects, awarding approximately $558,000, because Doka submitted complete contracts and evidence demonstrating its performance, the defendant’s nonpayment, and the resulting damages.

However, the Court rejected the breach of contract claim on a fourth project because the contract submitted to the Court was incomplete and did not include the terms and conditions necessary to establish the claim.

The Court also denied several additional claims because the supporting documentation was insufficient, including claims under New York’s Prompt Payment Act, account stated, Article 3-A of the Lien Law, quantum meruit, unjust enrichment, replevin, and conversion.

Among other deficiencies, the plaintiff failed to submit invoices demonstrating when they were sent and whether they were disputed, failed to provide sufficient evidence that trust funds had actually been received and diverted, and failed to specifically identify equipment allegedly being wrongfully withheld.

The Court also declined to award attorneys’ fees at that time because the plaintiff failed to submit adequate documentation establishing the amount and reasonableness of the fees incurred.

Construction companies should maintain a complete and organized project record throughout the life of every project. At a minimum, that record should include:

  • Fully executed contracts and all incorporated terms and conditions;
  • Copies of invoices and proof showing when they were transmitted;
  • Payment records and account statements;
  • Documentation regarding receipt and use of project funds where trust claims may be asserted;
  • Detailed records identifying rented, damaged, missing, or unreturned equipment; and
  • Detailed attorney billing records where contractual attorneys’ fees may be recoverable.

A defendant’s default may eliminate the opposition, but it does not eliminate the plaintiff’s burden of proof.

If you would like more information regarding this topic please contact Thomas S. Tripodianos at ttripodianos@wbgllp.com or call (914) 607-6440

Federal Ownership Alone Does Not Guarantee Miller Act Protection

Written by Thomas S. Tripodianos on . Posted in Legal Alerts.

A recent federal court decision highlights an important risk for subcontractors performing work at federally owned facilities: a project’s connection to the federal government does not necessarily make the Miller Act applicable.

In U.S. v. E.W. Howell Co. LLC, a steel subcontractor sought to recover approximately $1.5 million allegedly due for work performed at Brookhaven National Laboratory. Although the laboratory is owned by the federal government, it is operated by a private entity that contracted with the project’s prime contractor.

The prime contractor furnished payment and performance bonds to the private operator. The United States was not named as an obligee on the bonds.

The subcontractor argued that the Miller Act applied because the work was performed on federally owned property and federal regulations required the United States to be named on the payment bond. The Court rejected those arguments and dismissed the case for lack of federal jurisdiction.

The Court concluded that:

  • The payment bond was furnished to a private entity, not to the United States.
  • The private operator was a federal contractor, not an agent of the federal government.
  • The Court could not treat the United States as an obligee merely because it should have been included on the bond.
  • The subcontractor was responsible for confirming that the required payment protections were actually in place.

The decision also left the subcontractor subject to the subcontract’s requirement that disputes be litigated in Nassau County Supreme Court and its requirement that the parties participate in mediation before commencing litigation.

Subcontractors should not assume that the Miller Act applies simply because the project involves federally owned property, federal funding, or a federal facility. Before beginning work, subcontractors should obtain and review the payment bond and confirm:

  1. The identity of the bond obligees;
  2. Whether the United States is expressly named;
  3. Whether the bond satisfies applicable federal requirements; and
  4. Whether the subcontract contains mandatory mediation, notice, or forum-selection provisions.

The best time to determine whether a payment remedy exists is before the work is performed—not after payment stops.

If you would like more information regarding this topic please contact Thomas S. Tripodianos at ttripodianos@wbgllp.com or call (914) 607-6440

Owner-Caused Delays Do Not Excuse a Contractor’s Failure to Maintain Essential Services

Written by Thomas S. Tripodianos on . Posted in Legal Alerts.

A recent New York decision serves as a pointed reminder that a contractor performing work in an occupied residence must plan and sequence its work to preserve—or promptly restore—essential sanitary facilities, even when owner-directed changes delay portions of the project.

In Bak v. U.S. Levin Grp Corp., 2026 N.Y. Slip Op. 51045(U) (Civ. Ct., Kings County July 5, 2026), the Civil Court of the City of New York awarded a homeowner $17,400—the entire amount she had paid under the parties’ renovation contract—after the contractor left the apartment’s only toilet unusable for more than one month.

The Dispute

The contractor was retained to renovate the plaintiff’s bathroom and perform additional work throughout her apartment. During construction, the contractor removed the apartment’s only toilet. It was not restored to service for more than a month.

The plaintiff lived in the apartment with her 81-year-old husband, who was in poor health. While the toilet was unusable, the couple was required to leave their building and use restroom facilities in a neighboring building.

The contractor argued that the project had been delayed because the plaintiff changed her selections for bathroom tile and other finishing materials. The contractor ultimately completed the renovation, and the bathroom was operational by the time of trial.

The Court’s Decision

Following a bench trial, the court found that the contractor had materially breached its obligation to perform the renovation in a good and workmanlike manner.

Although the court credited the contractor’s testimony that the plaintiff’s material-selection changes caused some delay, it held that those changes did not justify leaving the apartment without its only toilet for several weeks. The court emphasized that changes affecting finish work did not relieve the contractor of its separate responsibility to implement reasonable measures to restore basic sanitary facilities or otherwise mitigate the hardship imposed upon the occupants.

The court awarded the plaintiff $17,400, representing the full amount she had paid the contractor. The award was intended to compensate her for the diminished value of the contractor’s performance, the prolonged loss of use of an essential portion of her home, and the resulting inconvenience.

Limits on Consequential Damages

The plaintiff also contended that the ordeal contributed to her husband’s declining health and subsequent death. The court rejected that portion of the claim because the plaintiff had not asserted a properly supported wrongful-death or personal-injury cause of action and presented no competent medical evidence establishing causation.

The court further held that the husband’s death was not a reasonably foreseeable consequence contemplated by the parties when they entered into the renovation contract. Accordingly, no damages were awarded for his illness, suffering, or death.

Practical Implications for Contractors

The decision illustrates that an owner’s changes, indecision, or late material selections will not automatically excuse every resulting project condition. The contractor must establish a causal relationship between the owner’s conduct and the specific delay or disruption for which the contractor seeks relief.

More importantly, delays affecting finishes do not necessarily justify leaving essential building systems unavailable. On projects in occupied residences, contractors should separately plan for temporary toilets, temporary plumbing connections, phased shutdowns, expedited restoration, temporary relocation arrangements, or other reasonable measures when work will interrupt critical services.

Change orders and delay notices should identify not only the additional time and cost resulting from an owner’s change, but also any effect on habitability, access, plumbing, electrical service, heat, water, fire protection, or other essential systems. The documentation should explain the available mitigation measures, their cost, and which party is responsible for authorizing and paying for them.

Contractors should also avoid relying on generalized statements that “owner changes delayed the project.” Daily reports, emails, photographs, procurement records, schedules, requests for information, and written notices should demonstrate precisely what work was affected and why the contractor could not proceed.

The Bottom Line

Bak is a trial-level, fact-specific decision, but its practical lesson is significant: a contractor may be found to have materially breached its contract even when the work is eventually completed and even when the owner contributed to project delays.

When construction affects an occupied home, the contractor’s duty to perform in a good and workmanlike manner includes reasonable planning and mitigation to protect the occupants’ ability to use essential portions of the premises. Owner-caused delay may support an extension of time or additional compensation, but it is not a blank check to disregard habitability and basic sanitary needs.

Welby, Brady & Greenblatt, LLP counsels contractors, subcontractors, owners, developers, and construction managers concerning contract drafting, project administration, delay claims, change orders, payment disputes, and construction litigation.

For additional information concerning this decision or construction-contract risk management, please contact Thomas S. Tripodianos at ttripodianos@wbgllp.com or (914) 428-2100.

This Legal Alert is provided for informational purposes only and does not constitute legal advice. Readers should consult counsel regarding the application of the decision to their particular contracts, projects, and circumstances.

If you would like more information regarding this topic please contact Thomas S. Tripodianos at ttripodianos@wbgllp.com or call (914) 607-6440

First Department Confirms: In NYC Excavation Work, the Party Digging Bears the Risk of Protecting the Neighbor

Written by Thomas S. Tripodianos on . Posted in Legal Alerts.

The Appellate Division, First Department’s decision in 1992 Third Realty LLC v. Third Avenue NY Realty LLC is an important reminder for developers, contractors, adjacent property owners, design professionals, and insurers involved in New York City excavation and foundation work.

The Court held that an adjoining property owner could not be held liable in negligence for a developer’s construction delay damages allegedly caused by the poor condition of the neighboring building. The key takeaway is straightforward: under NYC Building Code § BC 3309.4, the party performing soil or foundation work bears the duty, at its own expense, to preserve and protect adjoining structures. That duty applies even where the adjoining building is allegedly old, unstable, defective, or non-code-compliant.

The case involved neighboring Manhattan properties. The developer began excavation and foundation work for a new building. The adjacent owner alleged that the work, including pile driving and dewatering, caused its nine-story building to settle and lean. The New York City Department of Buildings issued a stop work order identifying a potential hazard from soil or foundation work affecting the adjoining property and directing the developer to provide engineering remedial measures.

The developer responded with a negligence counterclaim against the adjoining owner. It alleged that the adjoining building had been defectively designed, poorly maintained, and left in an unsafe condition, which allegedly caused or contributed to the stop work order. The developer sought at least $16 million in delay-related damages. The trial court allowed that counterclaim to proceed. The First Department reversed and dismissed it.

The First Department held that the adjoining owner did not owe the developer a duty to design, construct, or maintain its building in a way that would protect the developer’s excavation project from delay.

The Court emphasized that § BC 3309.4 places the relevant duty on the person performing the excavation or foundation work. In other words, the developer — not the neighbor — controlled the excavation, the protection means and methods, the remedial measures, and the risk created by the project. Imposing a reciprocal duty on adjoining owners would conflict with the Building Code’s allocation of responsibility and could expose property owners to unpredictable, insurer-like liability for future neighboring projects.

The Court also rejected the developer’s attempt to recover purely economic delay damages in negligence. New York negligence law generally does not allow recovery for purely economic losses absent personal injury, property damage, contractual privity, or another recognized special duty. The developer claimed delay damages, not injury to person or property. That was not enough.

This decision strengthens the position of adjoining owners facing claims that their building’s preexisting condition delayed a neighboring development project. A developer cannot avoid its excavation-protection obligations by arguing that the neighboring building was already defective or unstable. The worse the condition of the neighboring building, the greater the practical burden on the excavator to plan, monitor, and protect against movement.

For developers and contractors, the lesson is equally direct. Before excavation begins, the project team should make sure it has a strong record of:

  • preconstruction surveys;
  • license/access agreements;
  • geotechnical and structural review;
  • vibration and movement monitoring;
  • support of excavation plans;
  • dewatering protocols;
  • DOB filings and correspondence;
  • insurance and indemnity protections; and
  • emergency stabilization procedures.

License agreements with adjoining owners should be carefully drafted to address access, inspections, monitoring, professional fees, insurance, indemnity, emergency work, DOB response obligations, and dispute procedures. A vague license agreement is not risk management; it is just a fight with better stationery.

The First Department’s message is clear: in New York City excavation and foundation work, the party digging bears the burden of protecting adjoining structures. A developer generally cannot shift delay damages to the neighbor by claiming that the adjacent building was old, defective, or unstable — especially where the developer seeks only economic losses.

Breaking News: Federal Court Enjoins New York’s Off-Site Custom Fabrication Prevailing Wage Amendment

Written by Gregory J. Spaun on . Posted in Legal Alerts.

At the end of last year, I wrote about New York’s continuing expansion of prevailing wage obligations. What began as a requirement tied to traditional public work has, over time, extended into private projects receiving public benefits, certain hauling operations, renewable energy projects, contractor registration requirements, and electronic certified payroll filing obligations. Of all these developments, the one that caused the most immediate concern in the construction industry was the amendment extending New York prevailing wage requirements to certain off-site custom fabrication performed for public works projects.

That amendment was scheduled to take effect on June 18, 2026, and was to apply to contracts put out to bid on or after that effective date. In general terms, the amendment would have required prevailing wages to be paid to workers performing covered custom fabrication for a New York public works project, even when that fabrication occurred away from the project site, and even when it occurred outside New York—or the United States. The applicable rate would have been the prevailing wage rate for the New York county where the public work project is located, not the wage rate where the fabrication facility is located.

The statute covers custom fabrication that is “solely and specifically designed and engineered for a specified public work project”. It identifies, among other items, exterior or interior wall panel systems, woodwork, electrical, plumbing, heating, cooling, ventilation or exhaust duct systems, rebar cages, and mechanical insulation. A later chapter amendment narrowed the definition by removing the prior open-ended phrase “but not limited to”, and by excluding components, portions, modules, or materials that are otherwise stocked or readily available absent a specified public work project. Even so, the statute still prefaces the list with the word “including”. Because of these issues, the practical line between a covered custom-fabricated item and an ordinary supplied component remains far from self-evident.

The compliance problems were obvious. Public owners and contractors would have needed to determine, at the bidding and procurement stage, whether off-site work qualified as covered custom fabrication. Contractors would then have had to push New York prevailing wage, certified payroll, and registration requirements down the supply chain—including to fabricators located in other states or foreign jurisdictions. That raises real-world questions that the statute did not adequately answer: How is a New York contractor supposed to compel an out-of-state or international supplier to register with the New York State Department of Labor? How are certified payroll obligations enforced against a supplier with no New York presence? How should a fabrication shop segregate covered and non-covered work when identical components may be manufactured side by side for public and private projects?

Those concerns are not merely administrative. The amendment also presents serious constitutional questions because it attempts to regulate work performed (commerce) outside New York and, in some instances, outside the United States. Unsurprisingly, a coalition of construction industry organizations and contractors, led by the Associated General Contractors of New York State, commenced a federal lawsuit challenging the amendment, and sought emergency injunctive relief before the law took effect.

On May 28, 2026, the United States District Court for the Northern District of New York entered a Consent Order for Preliminary Injunction. The injunction prevents the off-site custom fabrication amendment from taking effect while the case proceeds through the initial motion practice. In practical terms, the amendment is on hold. It has not been upheld, struck down, or rewritten by the Court. It simply cannot be enforced at this time.

Under the Consent Order:

  1. The New York State Department of Labor and the New York Attorney General are barred from enforcing the amendment;
  2. Public owners, including state agencies, municipalities, and school districts, and private owners whose projects are otherwise subject to New York prevailing wage requirements, are not required to comply with the amendment or include its terms in their contracts;
  3. General contractors, subcontractors, fabricators, and other project participants, regardless of location, are not required to comply with the amendment or any of its conditions; and
  4. The State is barred from taking enforcement action, including civil penalties, debarment proceedings, or criminal referrals, based on alleged noncompliance with the amendment.

The injunction is good news for contractors, subcontractors, fabricators, taxpayers, and (ironically) public owners. Without the injunction, the amendment would have created immediate uncertainty in bidding, procurement, supply-chain management, certified payroll compliance, and contract administration. It also would have put contractors in the unenviable position of trying to impose New York public work obligations on suppliers who may have no operational connection to New York other than supplying a component ultimately used on a New York project.

That said, the injunction is only the first procedural step. Contractors should not treat it as the final word. The lawsuit will proceed, and the Court may ultimately uphold the amendment, invalidate it in whole or in part, or leave room for the Legislature to revise the statute. For now, the amendment is suspended until further order of the Court.

The takeaway is simple: the off-site custom fabrication prevailing wage amendment is not presently enforceable, but the issue is not over. Contractors bidding New York public work should continue to monitor the litigation, review bid documents carefully, preserve flexibility in subcontract and purchase order language, and avoid assuming that the injunction permanently eliminates the risk.

If you have questions about how prevailing wage requirements may apply to your company or your projects, please contact Gregory J. Spaun at gspaun@wbgllp.com or call (914) 607-6425. And, as always, stay tuned for further developments.

No License, No Lien – New York Court Bars Unlicensed Contractor from Recovery

Written by Brittany Lombardi on . Posted in Legal Alerts.

A Brooklyn plumbing subcontractor just learned the hard way that performing licensed work without a license, even with the owner’s apparent knowledge is a dead end in New York. In Glory R Construction Inc. v. 651923 18 Ave LLC, the Kings County Supreme Court vacated Glory R Construction’s $150,000 mechanic’s lien and dismissed its entire lawsuit, holding that because Glory R lacked the required plumbing and fire suppression sprinkler licenses, it had no right to recover anything—not under contract, not in quantum meruit, and not through a mechanic’s lien. 

The owners of a Brooklyn construction project hired New York H & Y Construction as general contractor, and H & Y subcontracted the plumbing and sprinkler work to Glory R. The problem was that Glory R did not hold the New York City licenses required to perform either type of work. According to Glory R, everyone involved knew that from the outset. Glory R claimed that before the project began, the parties agreed that Glory R would retain a licensed plumber to supervise the work and provide the necessary “license coverage,” with the contract price adjusted accordingly. The owners denied any such arrangement existed. 

After a payment dispute arose, Glory R filed a $150,000 mechanic’s lien, and later commenced a foreclosure action asserting claims for breach of contract, quantum meruit, account stated, and diversion of trust funds. 

The court ultimately found that none of those claims could survive because well settled case law takes an uncompromising approach to licensing violations in regulated trades. Citing a long line of appellate authority, the court reiterated that an unlicensed contractor performing work requiring a City license cannot recover payment under any theory. It does not matter that the owner allegedly knew of the licensing defect, nor does it matter that licensed professionals may have supervised the work, or that the work was actually completed. 

Glory R attempted to avoid dismissal by relying on the Court of Appeals’ decision in Charlebois v. Weller Assoc., which recognized a narrow exception where a contract expressly contemplates that a licensed professional will perform the regulated portion of the work. The court rejected that comparison because the subcontract here expressly required Glory R itself to be “lawfully licensed.” Ultimately, this distinction mattered. In Charlebois, the contract openly incorporated the licensed professional arrangement into the deal from the outset. Here, the subcontract treated Glory R itself as the properly licensed entity responsible for the regulated work. The alleged arrangement involving licensed plumbers existed only as a claimed side agreement outside the written contract. Because the subcontract also contained an integration clause stating that the written agreement represented the parties’ full understanding, the court refused to recognize the alleged supervision arrangement as a valid workaround. 

In practical terms, the court viewed Glory R as having held itself out contractually as the licensed plumbing subcontractor, even though it admittedly lacked the required licenses. That prevented Glory R from fitting within the limited Charlebois exception. 

Glory R also leaned heavily on the another appellate court’s decision in Matter of Migdal Plumbing & Heating Corp., which held that an unlicensed plumbing subcontractor on a commercial project was not automatically barred from enforcing contractual rights. That Court in t reasoned that the New York City plumbing licensing scheme imposed civil and criminal penalties for unlicensed work but did not expressly require forfeiture of payment rights. That court also distinguished plumbing licensing rules from consumer-protection statutes governing home improvement contractors, where the Legislature specifically barred unlicensed contractors from suing for payment. The Kings County court acknowledged the differing approaches,  but emphasized that it was bound to follow the stricter precedent. 

The court ultimately vacated the mechanic’s lien, dismissed the foreclosure action and contract claims, and canceled the lien discharge bond. 

The decision is a strong reminder that there is no practical workaround for licensing requirements on regulated New York City construction work. Contractors performing plumbing, fire suppression, electrical, HVAC, or similar licensed trades must hold the required license themselves. Using a licensed subcontractor or supervisor will not cure the problem, and an owner’s knowledge or participation in the arrangement will not save an otherwise unenforceable claim. 

If you would like more information regarding this topic please contact Brittany Lombardi at blombardi@wbgllp.com or call (914) 607-6439

Contractor Found Liable for Willful Exaggeration of Lien

Written by Frank Gramarossa on . Posted in Legal Alerts.

The mechanic’s lien is one of the most fundamental instruments to secure a contractor’s right to payment.  However, many contractors are unaware of the potential exposure that lie beneath them if they should file a defective mechanic’s lien.  What happens when a contractor fails to follow the regulations set forth under the Lien Law?  The lien becomes subject to dismissal and, in certain instances, may subject the lienor to civil liability for willful exaggeration.  The issue of willful exaggeration was recently analyzed by the New York Supreme Court, New York County, in a case captioned G Builders II LLC. v. Great Midwest Ins. Co., 2025 NY Slip Op 35010[U] [Sup Ct, NY County 2025]).

In G Builders II LLC., Summit, as owner, entered into a lease with a tenant by which Summit was to construct and operate a food hall at a property in the Financial District of Manhattan.  Plaintiff, G Builders II (“Plaintiff”), was hired as the general contractor, and a dispute arose over the amount due to Plaintiff.  Plaintiff filed a mechanic’s lien in the amount of $1,484,238.29, and later filed an action to foreclose on the lien.  Defendants served a demand for itemized statement pursuant to Lien Law §38, to which Plaintiff responded by itemizing its purported costs upon which the Lien was based. Afterwards, Plaintiff filed partial releases of Lien to reduce the Lien amount to $1,230,434.90. In response to the foreclosure action, Defendants filed a counterclaim for willful exaggeration of lien under Lien Law §§39 and 39-a.  

After discovery, Defendants filed a motion for summary judgment to dismiss the complaint,and on its willful exaggeration counterclaim, on grounds there was no basis for Plaintiff’s itemization of its Lien, which was calculated as follows: $545,035 owed to subcontractors; (ii) $99,660 in labor costs (ii) $385,374.36 for insurance and bonds; (iv) $184,079.72 for overhead and lost profits; (v) $13,499.18 for general computer costs; (vi) $41,100 for pre-construction services; (vii) $47,294.38 for COVID-related costs; (viii) $43,200 for metals; and (ix) $111,495.65 for increased material costs.

The Court found that Plaintiff based its calculations on a percentage of completion method, which was inappropriate given the contractual obligations for which Plaintiff was to submit requisitions for payment.  In addition, Plaintiff did not claim to have started physical construction,and it could not provide proof that any of its subcontractors were actually paid.  Furthermore, Plaintiff failed to substantiate its other itemized costs to comport with the contractual obligations for submitting requests for payment, specifically the provision stating “the Contractor shall submit [documentation] to demonstrate… payments already made by the Contractor on account of the Cost of the Work.”  Based on the substantial lack of documentation and substantiation of costs used in calculating the lien, the Court found that this was “not a case involving a mere inaccuracy or honest mistake in setting the amount of the lien”.  Based on the fact that Plaintiff included costs not allowed by the contract, combined with a “general lack of records evidencing costs and number of alleged good faith errors”, the Court concluded that Plaintiff willfully exaggerated its Lien.

As a result, Defendants’ motion was granted, the complaint was dismissed, and the lien wasordered to be discharged.  The presiding justice also ordered a subsequent hearing to determine the amount of damages to be awarded under Lien Law §39-a, which provides that a lienor who files a willfully exaggerated lien is liable in damages for a) the amount of the premium for a bond discharge the lien, b) reasonable attorney’s fees for services in securing the discharge of the lien, and 3) an amount equal to the difference by which the amount claimed to be due exceeded the actual amount due.  As such, Plaintiff’s exposure here is quite significant given the Court’s findings.

While exaggerating a mechanic’s lien will certainly get someone’s attention, this case shall serve as another harsh warning to contractors to first understand its contractual rights and obligations, and, if one should seek legal remedies to secure its right to payment, one must understand what types of costs are permitted under the Lien Law.  A failure to understand these legalities—and that exaggerating a mechanic’s lien is a really bad idea—may lead to serious consequences as seen in G Builders.  Consultation with an experienced construction attorney is vital in understanding and securing your rights as a contractor under the Lien Law.