How an Exaggerated Mechanics Lien Can Harm Your Debt Collection Case

An image of tools to represent an exaggerated mechanics lien.After improving the value of real estate and not getting paid, you filed a mechanics lien. Because you believed you were entitled to more, you filed the exaggerated mechanics lien for more than owed to you under the contract.

Due to this additional amount, the lien is now “exaggerated.” According to New York Lien Law Section 9, your mechanics lien should represent the unpaid amount of labor or materials. Therefore, exaggerated liens harm the recovery of your New York debt collection case.

The calculation of the amount due is usually straightforward. It may add the contract price and change orders, for example, and deduct payments and credits. But what about those times you believe you should be paid for extras, such as additional design fees or other intellectual property that wasn’t given a value in the underlying agreement?  We recommend not including these additional amounts to your mechanics lien.

Why You Shouldn’t Add to Your Mechanics Lien

Adding extra charges and fees in your lien will backfire on several fronts.

First, a willfully exaggerated lien is void, according to Sections 39 and 39A of the Lien Law. It states any willfully exaggerated lien is void and “no recovery shall be had thereon.” If your inflated lien is challenged, you will lose not only the amount attributable to the increased fees and balance but also the entire lien.

Second, you may owe money to the owner of the property for filling the exaggerated lien. In addition to voiding the lien, filing an exaggerated lien may actually cost you money. The owner of the real property, known as the lienee, may be entitled to recover from you. You may be responsible for the amount of the “exaggeration,” which is defined as “an amount equal to the difference by which the amount claimed to be due or to become due as stated in the notice of lien exceeded the amount actually due or to become due thereon.” On top of that, you may be saddled with the costs associated with the bond and their attorney’s fees.

Third, filing an exaggerated lien will harm your New York debt collection case. Although your mechanics lien was separate from the civil action against the contractor, the exaggerated lien will affect the recovery of your debt collection case.

The Importance of an Accurate Mechanics Lien

A savvy adversary opposing your debt collection actions will most likely assert a defense and counterclaim. They will use the willfully exaggerated lien to paint you as an unsavory creditor. They may ask the court not only to deny your case for several reasons, including under the Doctrine of Unclean Hands and assert counterclaims, but they may specifically request any monies awarded to you be held in escrow or paid to the property owner. It is of the utmost importance that your mechanic’s lien is accurate.

As we’ve discussed, a wilfully exaggerated mechanic’s lien will affect your ability to enforce the lien, cost you money, and could significantly harm your New York debt collection case.

If you have any questions about how best to pursue a balance owed to you as a result of working on real estate or property in New York, contact FFGN for a free consultation.