Waiver of Lien Bars Subcontractor's Claim for Work Performed

One of the most effective ways to protect an owner from mechanic’s liens is to require the general contractor and its subcontractors to sign waivers of lien as a condition to receiving payment. There are normally two types of lien waivers. One is a partial lien waiver submitted for a progress payment, which waives a contractor’s right to file a lien for work performed up to the date specified in the lien waiver. The other is a final lien waiver submitted for final payment after the project is completed. The final lien waiver means that the contractor is being paid in full and waives its right to file a lien against the project.

In the recent case of Beys Specialty, Inc. v Euro Construction Services, Inc., the appellate court addressed the enforceability of lien waivers signed by a subcontractor.

Background

In early 2010, the New York City Housing Authority (NYCHA) retained STV Construction, Inc. to perform construction management services in connection with a certain project. In March of 2010, STV entered into a written agreement with Beys under which Beys was to perform certain construction work at the Project. Beys, in turn, entered into a subcontract with Euro pursuant to which Euro agreed to perform Beys’ concrete and masonry scope of the work. The subcontract provided that Euro was to receive partial payments during the course of its work, but Euro was required to submit a signed lien waiver acknowledging that it had been paid all amounts claimed up to the specified date in the lien waiver. During the project, Euro executed a total of nine such lien waivers.

Euro’s subcontract also provided that Euro’s scheduled quantities may be adjusted based on actual conditions, and that the partial payments made under the contract were subject to adjustment. Beys ultimately adjusted Euro’s scheduled quantities based on adjustments STV made to its own contract. As a result of the adjustments, Beys alleged that Euro had been overpaid by $1,162,941. Beys commenced a lawsuit against Euro to recover this overpayment. Euro filed a mechanic’s lien for the amounts not paid by Beys and asserted a counterclaim in Beys’ lawsuit seeking to foreclose its lien. Beys moved to dismiss Euro’s lien foreclosure claim, arguing that the claim was barred as a result of the lien waivers Euro had signed during the project.

Decision

The appellate court found that, based on the unambiguous language of the lien waivers, Euro had waived and released any claims it had against Beys up through December 29, 2011, the date of the final lien waiver. In addition, because there was no evidence that Euro performed any work after that date, the court held that it had no claim which would support the filing of a mechanic’s lien. Accordingly, the court dismissed Euro’s lien foreclosure counterclaim.

Comment

Here, the Beys court applied well settled case law to hold that the clear language of a lien waiver and release will bar a contractor from later making a claim to recover for work performed prior to the date specified in the lien waiver.

Because owners require lien waivers to be submitted prior to releasing payment, contractors would be well advised to make sure that the amount to be paid is correct and the date specified in the lien waiver matches the period of work for which the contractor is seeking payment.

If you would like more information regarding this topic please contact Alexander A. Miuccio at amiuccio@wbgllp.com or call (914) 607-6480