By Bruce Jervis
Most state mechanic’s lien statutes provide that if a lien claimant willfully exaggerates the amount of its claim, the lien may be declared null and void. Mechanic’s liens provide lien claimants with tremendous leverage against project owners. The purpose of these statutory provisions is to protect owners against overreaching or fraudulent claims.
This leads to a question: How does one determine that a mechanic’s lien claim was “willfully” exaggerated? Claims can be overstated for a variety of reasons. The fact the amount of a lien claim exceeded the amount the claimant was legally entitled to recover does not, in itself, establish willful exaggeration.
A New York court recently provided some guidance in this regard. If a mechanic’s lien was overstated due to mistake, inadvertence or a good faith dispute regarding the contract requirements, it is not willfully exaggerated. Willful exaggeration requires evidence of intentional misconduct in the calculation and filing of the lien.
Is this too strict a standard? Intentional misconduct is hard to prove, particularly in light of the numerous excuses that can be offered to explain the overstatement of a lien claim. We have all seen overstated mechanic’s lien claims. Have you seen claims that you considered willfully exaggerated? I welcome your comments.
