§ 13 — Priority of liens

New York § 13

• Jurisdiction: New York
• Law LIE: Lien
• Art. 2: Mechanics' Liens

Text

13. Priority of liens. (1) A lien for materials furnished or labor\nperformed in the improvement of real property shall have priority over a\nconveyance, mortgage, judgment or other claim against such property not\nrecorded, docketed or filed at the time of the filing of the notice of\nsuch lien, except as hereinafter in this chapter provided; over advances\nmade upon any mortgage or other encumbrance thereon after such filing,\nexcept as hereinafter in this article provided; and over the claim of a\ncreditor who has not furnished materials or performed labor upon such\nproperty, if such property has been assigned by the owner by a general\nassignment for the benefit of creditors, within thirty days before the\nfiling of either of such notices; and also over an attachment hereafter\nissued or a money judgment hereafter recovered upon a claim, which, in\nwhole or in part, was not for materials furnished, labor performed or\nmoneys advanced for the improvement of such real property; and over any\nclaim or lien acquired in any proceedings upon such judgment. Such liens\nshall also have priority over advances made upon a contract by an owner\nfor an improvement of real property which contains an option to the\ncontractor, his successor or assigns to purchase the property, if such\nadvances were made after the time when the labor began or the first item\nof material was furnished, as stated in the notice of lien. If several\nbuildings are demolished, erected, altered or repaired, or several\npieces or parcels of real property are improved, under one contract, and\nthere are conflicting liens thereon, each lienor shall have priority\nupon the particular part of the real property or upon the particular\nbuilding or premises where his labor is performed or his materials are\nused. Persons shall have no priority on account of the time of filing\ntheir respective notices of liens, but all liens shall be on a parity\nexcept as hereinafter in section fifty-six of this chapter provided; and\nexcept that in all cases laborers for daily or weekly wages shall have\npreference over all other claimants under this article.\n (1-a) Parties having assignments of moneys due or to become due under\na contract for the improvement of real property, unless such assignments\nbe set aside as diversions of trust assets as provided in article\nthree-a of this chapter, shall have priority as follows:\n An assignee of moneys or any part thereof, due or to become due under\na contract for the improvement of real property, whose assignment is\nduly filed prior to the filing of a notice of lien or assignment of\nevery other party to the action, shall have priority over those parties\nto the extent of moneys advanced upon such assignment before the filing\nof the notice of lien or assignment next subsequent to his assignment,\nbut as to moneys advanced subsequent to a notice of lien or assignment\nfiled and unsatisfied or not discharged such assignee for the purpose of\ndetermining his proportionate share of moneys available for distribution\nas provided in subdivision one of this section shall be treated as a\nlienor having a lien to the extent of moneys so advanced.\n An assignee of moneys or any part thereof, due or to become due under\na contract for an improvement of real property whose assignment is duly\nfiled subsequent to the filing of the notice of lien or assignment of\nany other party shall for the purpose of determining his proportionate\nshare of moneys available for distribution, as provided in subdivision\none of this section be treated as a lienor having a lien to the extent\nof moneys actually advanced upon such assignment prior to the filing\nthereof.\n (2) When a building loan mortgage is delivered and recorded a lien\nshall have priority over advances made on the building loan mortgage\nafter the filing of the notice of lien; but such building loan mortgage,\nwhenever recorded, to the extent of advances made before the filing of\nsuch notice of lien, shall have priority over the lien, provided it or\nthe building loan contract contains the covenant required by subdivision\nthree hereof, and provided the building loan contract is filed as\nrequired by section twenty-two of this chapter. Every mortgage recorded\nsubsequent to the commencement of the improvement and before the\nexpiration of the period specified in section ten of this chapter for\nfiling of notice of lien after the completion of the improvement shall,\nto the extent of advances made before the filing of a notice of lien,\nhave priority over liens thereafter filed if it contains the covenant\nrequired by subdivision three hereof. The lien of a vendee under an\nexecutory contract for the sale of land and the improvement thereof by\nthe construction of a building thereon shall, to the extent of amounts\npaid thereunder to the vendor before the filing of a notice of lien,\nhave priority over liens filed after the contract or memorandum thereof\nis recorded as provided in section two hundred ninety-four of the real\nproperty law if the recorded contract or memorandum specifies the total\namount of payments made by the vendee or required by the contract to be\nmade by the vendee before conveyance of title.\n (3) Every such building loan mortgage and every mortgage recorded\nsubsequent to the commencement of the improvement and before the\nexpiration of the period specified in section ten of this chapter for\nfiling of notice of lien after the completion of the improvement shall\ncontain a covenant by the mortgagor that he will receive the advances\nsecured thereby and will hold the right to receive such advances as a\ntrust fund to be applied first for the purpose of paying the cost of\nimprovement, and that he will apply the same first to the payment of the\ncost of improvement before using any part of the total of the same for\nany other purpose, provided, however, that if the party executing the\nbuilding loan contract is not the owner of the fee but is the party to\nwhom such advances are to be made, a building loan contract executed and\nfiled pursuant to section twenty-two of this chapter shall contain the\nsaid covenant by such party executing such building loan contract, in\nplace of the covenant by the mortgagor in the building loan mortgage as\nhereinbefore provided. Nothing in this subdivision shall be considered\nas imposing upon the lender any obligation to see to the proper\napplication of such advances by the owner; and nothing in this section,\nnor in that portion of section two of this chapter, defining "cost of\nimprovement" shall be deemed to impair or subordinate the lien of any\nmortgage containing the covenant required by this subdivision. To the\nextent that the trust res consists of the right to receive advances as\ndistinct from advances actually received, breach of the trust shall give\nrise to a civil action only. The covenant provided for herein shall be\ndeemed to have been made and to be in full force and effect if, in lieu\nof the foregoing provisions, a statement in substantially the following\nform is contained in the mortgage or contract, "subject to the trust\nfund provisions of section thirteen of the lien law."\n (4) Nothing in subdivision two or three of this section shall apply to\nany mortgage given by a purchaser for value from an owner making the\nimprovement and recorded prior to the filing of a lien pursuant to this\nchapter, provided the instrument of conveyance contains the provisions\nmentioned in subdivision five herein.\n (5) No instrument of conveyance recorded subsequent to the\ncommencement of the improvement, and before the expiration of the period\nspecified in section ten of this chapter for filing of notice of lien\nafter the completion of the improvement, shall be valid as against liens\nfiled within a corresponding period of time measured from the recording\nof such conveyance, unless the instrument contains a covenant by the\ngrantor that he will receive the consideration for such conveyance and\nwill hold the right to receive such consideration as a trust fund to be\napplied first for the purpose of paying the cost of the improvement and\nthat he will apply the same first to the payment of the cost of the\nimprovement before using any part of the total of the same for any other\npurpose. Nothing in this subdivision shall be construed as imposing upon\nthe grantee any obligation to see to the proper application of such\nconsideration by the grantor. Nothing in this subdivision shall apply to\na deed given by a referee or other person appointed by the court for the\nsole purpose of selling real property. Nothing in this subdivision shall\napply to the consideration received by a grantor who, pursuant to a\nwritten agreement entered into and duly recorded prior to the\ncommencement of the improvement, conveys to the person making such\nimprovement, the land upon which such improvement is made. However, such\na conveyance shall be subject to liens filed prior thereto, as provided\nby this chapter. To the extent that the trust res consists of the right\nto receive the consideration for such conveyance as distinct from the\nconsideration actually received, breach of the trust shall give rise to\na civil action only. The covenant provided for herein shall be deemed to\nhave been made and to be in full force and effect if, in lieu of the\nforegoing provisions, a statement in substantially the following form is\ncontained in the instrument of conveyance, "subject to the trust fund\nprovisions of section thirteen of the lien law."\n Except that this section shall not apply to any mortgage taken by the\nhome owners' loan corporation, a corporation created under an act of\ncongress, known as the "home owners' loan act of nineteen hundred\nthirty-three," and the "home owners' loan act of nineteen hundred\nthirty-three as amended," and said mortgage shall have priority over any\nand all liens filed subsequent to the date of the recording of said\nmortgage whether or not the cash and/or bonds for which said mortgage\nhas been taken as security, shall have been advanced at the time of the\nexecution of such mortgage or subsequent thereto, and it shall not be\nnecessary to execute and file any building loan contract or any other\ncontract, in compliance with this section or any part thereof.\n (6) Every assignment of moneys, or any part thereof, due or to become\ndue under a contract for the improvement of real property shall contain\na covenant by the assignor that he will receive any moneys advanced\nthereunder by the assignee and will hold the right to receive such\nmoneys as trust funds to be first applied to the payment of trust claims\nas defined in section seventy-one of the lien law, and that he will\napply the same to such payments only, before using any part of the\nmoneys for any other purpose.\n