{"id":714,"date":"2017-05-17T10:00:00","date_gmt":"2017-05-17T10:00:00","guid":{"rendered":""},"modified":"2017-12-13T18:24:50","modified_gmt":"2017-12-13T18:24:50","slug":"nyc-courts-make-light-of-certified-lien-waivers","status":"publish","type":"post","link":"https:\/\/www.lienitnow.com\/blog\/2017\/05\/nyc-courts-make-light-of-certified-lien-waivers.html","title":{"rendered":"NYC Courts Make Light of Partial and Final Lien Waivers"},"content":{"rendered":"<h2><span style=\"background-color: white; color: #373739; font-family: verdana; font-size: 12px;\">Sworn Partial and Final Lien Waivers Do Not Change Causes of Action<\/span><\/h2>\n<p><span style=\"background-color: white;\"><span style=\"font-family: inherit;\">A new decision issued by the Supreme Court of New York County casts new doubt on the efficacy of obtaining sworn partial and final lien waivers. Lien waivers have become a staple of the construction industry. Most contracts now require that, in order to receive payment, a subcontractor, supplier or contractor must submit a lien waiver that, in most cases, certifies everyone working for them has been paid, and will be paid from the amounts being received in exchange for the lien waiver.<\/span><\/span><br \/><span style=\"background-color: white;\"><span style=\"font-family: inherit;\"><br \/><\/span><\/span><span style=\"background-color: white;\"><span style=\"font-family: inherit;\">The purpose of the lien waivers is to ensure that no liens will be filed on a construction project by either the contractor providing the lien waiver, or any of its subcontractors or suppliers. Lien waivers originally simply provided this information, and if it was not accurate, would result in a breach of contract action if mechanic&#8217;s liens were later filed by subcontractors or suppliers. &nbsp;The American Institute of Architects provides a form lien waiver, AIA Document G706. The G706 is not a sworn statement, but merely provides the owner with the information requested regarding payments to subcontractors and suppliers.<\/span><\/span><br \/><span style=\"background-color: white;\"><span style=\"font-family: inherit;\"><br \/><\/span><\/span><span style=\"background-color: white;\"><span style=\"font-family: inherit;\">However, after some time (and many frustrated owners who saw liens being filed on their properties by subcontractors and suppliers who were not getting paid, despite the lien waivers being submitted by contractors), sworn statements accompanying the lien waiver became popular. The AIA even provides form Document G706A, which is the Contractor&#8217;s Affidavit of Release of Liens, supporting the G706 by providing a sworn statement stating that all releases and lien waivers have been received from subcontractors and suppliers.<\/span><\/span><br \/><span style=\"background-color: white;\"><span style=\"font-family: inherit;\"><br \/><\/span><\/span><\/p>\n<div><span style=\"background-color: white;\"><span style=\"font-family: inherit;\">The hope with duly sworn lien waivers was that contractors would be more circumspect in submitting incorrect requests for payment if they believed these incorrect statements could result in a fraud claim against them. Fraud claims often carry with them personal liability, or significantly increased damages, so there is incentive in avoiding them.&nbsp;<\/span><\/span><\/div>\n<p><span style=\"background-color: white;\"><span style=\"font-family: inherit;\"><br \/><\/span><\/span><span style=\"font-family: inherit;\"><span style=\"background-color: white;\">But fraud claims are also difficult to assert, and even more difficult to prove. Courts tend to try to find other ways of dealing with fraud claims, rather than the fraud route. Instead, courts across the country have taken fraud claims and found other, more straightforward, ways of dealing with them.<\/span><\/span><br \/><span style=\"font-family: inherit;\"><span style=\"background-color: white;\"><br \/><\/span><\/span><span style=\"font-family: inherit;\"><span style=\"background-color: white;\">Recently, the New York City Courts were presented with a case of an incorrect series of lien waivers submitted by a contractor, and the question of whether the sworn statements subjected the contractor to fraud claims. &nbsp;In theory, sworn statements are obtained with the main goal of subjecting a person to fraud claims in the event the statements are not true. But, in keeping with recent trends in New York law, the court declined to allow private contractual obligations to impose fraud implications.<\/span><\/span><br \/><span style=\"background-color: white;\"><span style=\"font-family: inherit;\"><br \/><\/span><\/span><span style=\"font-family: inherit;\"><span style=\"background-color: white;\">The case,&nbsp;<\/span><u>Solar Elec. Sys., Inc. v. Skanska USA Bldg., Inc.<\/u>, 2017 NY Slip Op 30962(U) (Sup. Ct.)<span style=\"background-color: white;\">, dealt with the issue of whether Defendant Skanska USA Bldg., Inc. could assert a claim against Plaintiff, Solar Elec. Sys., Inc., and its President, for fraud and misrepresentation. The underlying project at issue was for the renovation of a school building at Beacon High School, located in New York, New York. The&nbsp;<\/span><span style=\"background-color: white;\">New York City School<\/span>&nbsp;<span style=\"background-color: white;\">Construction Authority was the owner of the Beacon High School Project.&nbsp;<\/span><\/span><br \/><span style=\"background-color: white;\"><span style=\"font-family: inherit;\"><br \/><\/span><\/span><span style=\"font-family: inherit;\"><span style=\"background-color: white;\">T<\/span><span style=\"background-color: white;\">he basis of Skanska&#8217;s fraud claim concerned certified lien waivers. &nbsp;Skanska alleged that, in exchange for payment from Skanska, Solar submitted sworn statements representing that Solar had paid its subcontractors and suppliers. However, two of Solar&#8217;s subcontractors and suppliers later filed liens on the project. The fact that liens had been filed by those working for Solar brought Skanska to believe that the sworn statements in the lien waivers were untrue, and amounted to a fraudulent misrepresentation. Further aggravating the situation was that Solar refused to take steps to have the liens removed, or indemnify Skanska.<\/span><\/span><br \/><span style=\"background-color: white;\"><span style=\"font-family: inherit;\"><br \/><\/span><\/span><span style=\"background-color: white;\"><span style=\"font-family: inherit;\">Solar responded to the accusations by filing a motion to dismiss the fraud claims, asserting there was no cause of action for fraud because the lien waivers arose out of contractual obligations. Solar further alleged that Skanska owed it significant amounts of money for work performed. Importantly, Solar argued that the lien waiver statements and the refusal to indemnify Skanska against the liens were all purely contractual obligations, and that Skanska&#8217;s sole remedy was to assert a breach of contract claim.<\/span><\/span><br \/><span style=\"background-color: white;\"><span style=\"font-family: inherit;\"><br \/><\/span><\/span><span style=\"font-family: inherit;\"><span style=\"background-color: white;\">The court agreed, stating: &#8220;<\/span><span style=\"background-color: white;\">Here, it is without question that the underlying substance of both the breach of contract claim and the fraud claim is entirely of the same origination. Defendants allege in their Third Counterclaim that due to Solar&#8217;s<\/span><span style=\"background-color: white;\">&nbsp;breaches of the subcontract, Skanska overpaid and was subject to project liens w<\/span><span style=\"background-color: white;\">hich were not indemnified by Solar.&nbsp;<\/span><span style=\"background-color: white;\">These obligations of Solar arise from the agreement between the parties. Borducci had no separate or independent duty to the defendants, and the alleged false statements are tied directly to the harm caused by the breach of contract. Additionally, defendants claim the exact same compensatory damages in both of the counterclaims, arising out of Solar failing to pay its subcontractors and suppliers.&nbsp;<\/span><span style=\"background-color: white;\">There is no alleged independent<\/span><span style=\"background-color: white;\">&nbsp;<\/span><span style=\"background-color: white;\">basis outside of the contract between the parties that would give rise to a cognizable fraud claim as the alleged justifiable reliance and inducement springs directly from the contract itself&#8230;.<\/span><span style=\"background-color: white;\">Plaintiff&#8217;s<\/span><span style=\"background-color: white;\">&nbsp;purported fraud<\/span><span style=\"background-color: white;\">&nbsp;damages are actually contract damages. Plaintiff seeks to be placed in the same position that it would have been in had&#8230;&#8221; Solar performed under the contract.<\/span><\/span><br \/><span style=\"background-color: white;\"><span style=\"font-family: inherit;\"><br \/><\/span><\/span><span style=\"background-color: white;\"><span style=\"font-family: inherit;\">The case is not unusual in New York courts, and puts, front and center, the question of why owners and other construction project participants insist on having sworn or certified statements when it comes to lien waivers, payroll, or other documents. It may be that they simply want to make the contractor or subcontractor complete the lien waivers more carefully, or think twice before submitting an incorrect lien waiver. Financing requirements may also have something to do with this phenomenon. Or it could be that owners simply feel better when they receive a certified document. The courts, however, at least in New York, have found no difference between certified and un-certified lien waivers. &nbsp;<\/span><\/span><br \/><span style=\"background-color: white; color: #373739; font-family: verdana; font-size: 12px;\"><br \/><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Sworn Partial and Final Lien Waivers Do Not Change Causes of Action A new decision issued by the Supreme Court of New York County casts new doubt on the efficacy of obtaining sworn partial and final lien waivers. Lien waivers have become a staple of the construction industry. Most contracts now require that, in order [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1124,1123,1125,1126],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v21.8 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>NYC Courts Make Light of Partial and Final Lien Waivers - Tools of the Trade | LienItNow Blog<\/title>\n<meta name=\"description\" content=\"Sworn Partial and Final Lien Waivers Do Not Change Causes of ActionA new decision issued by the Supreme Court of New York County casts new doubt on the\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.lienitnow.com\/blog\/2017\/05\/nyc-courts-make-light-of-certified-lien-waivers.html\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"NYC Courts Make Light of Partial and Final Lien Waivers - 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