[author: Michelle Cuozzo]*

Ferrara v. Peaches Café LLC, 2018 NY Lexis 3244 (November 20, 2018)

COR Ridge Road Company, LLC (“COR”), as landlord, entered into a 10 year lease with Peaches Café, LLC (“Peaches”).  The lease imposed certain construction requirements on Peaches for it to operate its restaurant, including adherence to specific electrical specifications. The lease also provided that COR approve of any improvements to the premises, that Peaches submit to COR all design plans for the electrical work, and that any improvements made become part of the realty.  Angelo Ferrara (“Ferrara”) performed some of the electrical work.

After Peaches closed its business, Ferrara filed a mechanics lien against the property for more than $50,000 Peaches owed him, noticing both Peaches and COR. Ferrara subsequently sought to foreclose on the lien.  Both Ferrara and COR moved for summary judgment in the foreclosure action, and the trial court granted COR’s motion and dismissed the complaint against it. The Appellate Division granted Ferrara’s motion for summary judgment, upholding the validity of the lien on COR’s property. COR appealed to the Court of Appeals, which affirmed.

COR, relying on a Delany & Co. v Duvoli, 278 NY 328 (1938), argued that a contractor performing work for a tenant can only enforce a lien on the property if the landlord expressly or directly consented to the work performed. The Court of Appeals rejected this argument, holding that there is no requirement under Lien Law § 3 or case law that a landlord like COR provide such direct consent. Rather, in order to enforce a lien, the landlord must “either be an affirmative factor in procuring the improvement to be made, or having possession and control of the premises assent to the improvement in the expectation that he will reap the benefit of it.” Affirmative acts by a landowner include lease terms requiring the tenant to make specific improvements to the property.  If no such requirement is present in the lease, the owner’s overall course of conduct and the nature of the relationship between the owner and the lienor may demonstrate consent for purposes of Lien Law § 3.

Here, the lease between Peaches and COR clearly required Peaches to undertake the electrical work performed by Ferrara in order for Peaches to operate the restaurant in accordance with the lease provisions.  It also authorized COR to retain supervision over the work by reviewing, commenting on, revising, and granting ultimate approval for the design drawings related to the work. Therefore, the Court found that, pursuant to the lease terms, COR had consented to the performance of the electrical work and Ferrara’s lien against the property was valid.

To view the full text of the court’s decision, courtesy of Lexis®, click here.

*Law Clerk in the Construction Practice of Pepper Hamilton LLP.  Not admitted to practice law.