Lien Law Update

Monthly Lien Law Update for June

Keystone Pipeline Construction Assures Resident’s Not to Worry About Liens

TC Energy, formerly Keystone XL, attended a special meeting with the Meade County Commission in South Dakota to address questions regarding major construction permits and re-starting construction of the pipeline. Over 50 residents of Meade County attended to question TC Energy about the impacts the construction would have on them. Questions ranged from who would be responsible for rock chipped windshields arising from construction gravel transport, to how TC Energy will protect property owners from liens.

Earlier this year, Brandenburg Drainage, a TC Energy subcontractor, filed liens against Meade County residential properties involved in the construction for a total value of over $1,000,000. These liens were released shortly thereafter but the residents of Meade County wanted to know how TC planned to avoid the filing of future liens. TC Energy promised a more proactive approach to contracting with subcontractors to avoid future liens but did not elaborate on the details. It’s likely that, future TC energy subcontracts will include language waiving subcontractor lien rights and requiring its subcontractors to indemnity TC Energy against lower tier subcontractor liens.



New York Court of Appeals Holds Lease Terms Enough to Hold Landlords Liable for Liens Caused by Tenants

New York landlords often allow tenants to improve leased space to fit the tenant’s specific use or desires. Know in the industry as “tenant build-outs” the tenant will hire design, engineering, or construction contractors to perform the work. If the tenant fails to pay for their services or goods, the contractors can file liens against the leased property and look to the landlord for payment. Liens against the leased property forces the landlord to engage in the payment dispute, either by paying the claims to clear the property’s title or forcing the tenant to pay the disputed amounts.

The question before the New York Court of Appeals was whether such liens could be enforced against a landlord when the landlord did not expressly approve of the tenant’s improvements to the leased property, as in a typical “tenant build-out” scenario. In previous rulings, New York courts required proof that the landlord consented to the improvements before liens could be enforced against a landlord. This New York Court of Appeals decision expands how the landlord’s consent can determined by allowing courts to infer consent from the lease terms alone without any other expressed consent from the landlord. This will likely result in future New York lease agreements being drafted to expressly disclaim any rights to improvements without first obtaining the landlord’s specific written consent.

Government Funded Irma and Maria Hurricane Damage Repairs Result in Liens Against Residents

Residents in the US Virgin Island’s received lien notices against their property this month arising from subcontractor claims of failure to pay for work rebuilding hurricane damaged homes through the government’s Emergency Repair Home Program. After hurricanes Irma and Maria, prime contractors AECOM and Citadel were hired through this government program to begin repairing storm damaged homes. These prime contractors subcontracted some repair work to North Carolina-based subcontractor TJ Sutton Enterprises, who filed the liens claiming non-payment for repair work performed. AECOM and Citadel claim TJ Sutton’s invoices for the work in question have not met their invoicing requirements and, therefore, do not yet qualify for payment.

TJ Sutton has since been removed from the repair program. US Virgin Island’s Governor Albert Bryan stated, “… Sutton knows that these homeowners are not responsible for any payments to any of the almost 100 contractors participating in the federally funded housing repair program, this subcontractor is ruthlessly using storm victims as a means to an end…” The Office of the Governor acknowledges that prime contractors are responsible for paying their subcontracts, regardless of whether the prime contractor has received payment from the program. Nonetheless, The Office of the Governor and other local government agencies are working with FEMA to expedite payments to prime contractors in an effort to mitigate downstream payment disputes.


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