NYC Construction Dispute Lawyers
KLG represents contractors, subcontractors, and owners in construction payment, lien, and contract disputes throughout New York City.
Construction Disputes We Handle
Mechanics' Lien Claims
A lien secures unpaid amounts for labor and materials against the owner's interest in the improved property. Filing runs eight months from the last work on most private jobs and four on single-family dwellings. We file and foreclose liens, and we discharge liens that are defective, untimely, or exaggerated.
Payment Disputes & Withholding
New York's prompt payment statute gives covered private contracts reaching $150,000 fixed windows to approve or dispute an invoice and to pay what is approved, with one percent monthly interest on late amounts. We pursue unpaid balances and retainage, and defend withholding the contract supports.
Delay & Disruption Claims
Recovery depends on which party caused the critical-path delay and whether the contract permits damages for it. Excusable, compensable, and concurrent delay carry different outcomes, and many contracts bar delay damages or condition them on written notice. We build the record that proves causation.
Change Order Disputes
Extra work performed on a verbal instruction is the most common unpaid claim in construction. Contracts require written authorization, though a course of conduct accepting unsigned changes can waive that requirement. We reconstruct what was directed, who approved it, and what the added scope cost.
Bond & Surety Claims
Payment bonds, performance bonds, and lien discharge bonds create a route to recovery that does not depend on the owner's remaining funds. A lien discharged by bond attaches to security posted at 110 percent of the claim. We prosecute and defend bond claims and pursue sureties that deny without basis.
Defect & Workmanship Claims
These claims turn on what the plans and specifications required, whether the work departed from them, and what correction costs. Substantial completion, punch list scope, and warranty terms frame the exposure. We use experts to establish the deviation, and on defense we contest causation and betterment.
Each Side of a Construction Dispute Carries Different Exposure
A contractor or subcontractor arrives having already spent the money. Labor and materials are in the building, the balance is unpaid, and the statutory clocks protecting the claim started running from the last day of work rather than the day the dispute became obvious. The remedies that carry weight during performance expire first.
An owner arrives with encumbered title and a claim nobody has tested. A filed lien blocks a sale or a refinancing whether or not the amount is right, and the owner has to decide whether to bond it or contest what is claimed. That decision turns on what the project record shows and what was still owed up the chain.
A general contractor is squeezed from both directions at once. The owner withholds above while subcontractors file below, and every requisition already collected carries trust obligations that reach the individuals who moved the funds. Defending payment claims and pursuing the owner become the same case.
How Construction Contract Disputes Start in New York
Every construction contract is built around the assumption that things will go wrong. Notice provisions, written change procedures, and payment conditions exist because problems are expected on any project. The dispute starts when one side fails to follow these contractual mechanics during a problem, and the other side later argues the failure constitutes a breach.
By the time the legal posture matters, the documentary record is already set. New York courts read that record closely, and the question is rarely who is right in the abstract. It is whether the contemporaneous paperwork supports the claim or undermines it, measured against what the contract required at each step of the work.
KLG represents contractors, subcontractors, and property owners across Brooklyn, Queens, Manhattan, and Staten Island in disputes ranging from residential renovations to commercial buildouts. What begins as a payment dispute or a scope disagreement hardens into construction litigation when informal resolution fails and both sides reconstruct the project from documents.
Statute Sets Payment Deadlines, Retainage Caps, and Stop-Work Rights
New York's prompt payment statute governs covered private construction contracts reaching $150,000. Public works and several categories of residential work fall outside it. An owner has twelve business days from delivery of a complete invoice to approve or disapprove it, and thirty days after approval to pay. Late payment carries one percent monthly interest.
Retainage is capped at five percent of the contract sum, and a contract provision requiring more is void. The cap binds what an owner holds from a general contractor and what a general contractor holds from its subcontractors, and downstream retainage may not exceed what the owner retained. Retainage is released within thirty days after final approval.
A contractor may submit a final invoice for payment in full on reaching substantial completion rather than waiting for final completion. Where an owner fails to approve, disapprove, or pay within the statutory windows, the contractor may suspend performance after ten days' written notice and an opportunity to cure. That right overrides contrary contract language.
The statute limits what the parties can negotiate away. Clauses applying another state's law or venue to a New York project are void, as are provisions requiring retainage above the cap. An expedited arbitration route exists for prompt payment violations after notice, and it reaches payment faster than a plenary action does.
Terminating Without Notice and Cure Can Void the Termination
Termination rights live in the contract, and courts read the steps strictly. Where an agreement requires written notice and a period to cure, skipping that step generally makes the termination ineffective regardless of how poor the work was. The exceptions are narrow, reaching a party that repudiates the contract or abandons the work, or a breach that cannot be cured.
A defective termination costs more than the termination itself. A party that terminates without following the contract can lose the right to set off completion and remediation costs against what it still owes, which means funding the replacement contractor while answering for the outstanding balance. Compliance with each step keeps those setoffs available.
Cause and convenience carry different exposure. A party terminated for convenience is generally limited to payment for work performed, while a party wrongfully terminated for cause can pursue a broader measure that includes lost profit on work never performed. That gap between the two measures is the reason terminations are litigated so heavily.
Many contracts include a conversion clause providing that a termination for cause becomes one for convenience where cause is not established later. Courts enforce that language, and exposure drops to the convenience measure. The contract's termination provisions also give the contractor its own right to end the work, typically conditioned on written notice.
Construction Defect Claims Accrue at Completion of the Work
A defect claim turns on conformance. The question is what the contract documents and the applicable building code required, and whether the work as built departed from them. Aesthetic disappointment with conforming work supports no claim, and a deviation that causes no measurable damage supports very little.
The clock runs from completion of the work. A contract claim carries a six-year period that accrues when the work is finished, and a latent defect discovered years afterward does not restart it. New York sets no outright statute of repose for buildings, so the accrual date governs whether a claim survives.
New homes carry a statutory warranty on top of the contract. It covers skillful construction for one year, the plumbing, electrical, heating, cooling and ventilation systems for two years, and material defects for six years, each measured from the warranty date. Written notice must reach the builder within thirty days after the applicable period ends.
The builder is entitled to respond before suit. An owner must give reasonable opportunity to inspect, test, and repair the condition before commencing an action on the warranty. On a condominium, the sponsor's obligation to correct defects in the common elements is set by the offering plan, which fixes its own notice windows.
Damages are measured by the cost to put the work right. The reasonable cost of repair or replacement is the ordinary measure, capped on a warranty claim at the replacement cost of the home excluding the land. Where repair would be disproportionate to the harm, a court can substitute the diminution in value.
Proof is built by experts on both sides. An owner establishing a defect shows what was required and how the work departed, then prices the correction, usually through an engineer or a licensed professional in the affected trade. A contractor defending one attacks causation and the scope of the proposed repair.
A Mechanic's Lien Reaches Only the Funds Still Owed Up the Chain
New York's Lien Law gives contractors, subcontractors, laborers, and material suppliers a claim against the improved property when construction work goes unpaid. A filed lien secures that claim against the owner's interest, subject to the statutory priority rules that govern competing interests in the property. The lien encumbers the property and generally must be satisfied, discharged, or bonded before a sale or refinancing closes free of it.
Recovery is capped by the funds owed up the chain. A subcontractor's lien reaches what the owner owed the general contractor when the notice of lien was filed, together with sums later earned under that contract, and a claim one tier below reaches only what the subcontractor above it was owed. Where competing liens exceed that fund, claimants share it proportionally rather than by filing order. A timely, valid lien can return nothing when the fund is empty.
Filing deadlines run from the last date labor or materials were furnished. Most private improvements carry eight months and single-family dwellings four. Retainage carries its own window, ninety days after the retainage became due. A filed lien lasts one year unless a foreclosure action is commenced and a notice of pendency filed within that period. An extension on a single-family dwelling requires a court order.
An owner or contractor can remove a lien from the property without resolving the underlying claim. A bond equal to 110 percent of the lien amount, or a deposit of the claimed amount with interest, discharges the lien against the real property and shifts it to that substitute security. Discharge concedes nothing on the amount owed, and the claim must still be established in court before the lienor reaches those funds.
Lien amounts are tested in the enforcement action. A court that declares an otherwise valid lien void for willful exaggeration after trial can hold the filer liable for the bond premium or deposit interest, the attorney's fees spent securing the discharge, and the difference between the amount claimed and the amount actually due. The penalty is strictly construed and does not reach an honest error.
Diverting Construction Trust Funds Creates Personal Liability
Money received for a construction improvement is impressed with a statutory trust the moment it arrives. An owner drawing on a construction loan, a general contractor collecting a requisition, and a subcontractor receiving payment each hold those funds as trustee, to be applied to labor, materials, and related project costs before anything else.
A separate trust arises for each improvement, and the trustee holds no property interest in the funds it receives. Money taken in on one project cannot be applied to costs on another. The trustee must keep books and records tracking trust assets, payments, and claims project by project, and those records are what a beneficiary examines when payment stops.
Applying trust money to another purpose is a diversion. Funding a different job, covering general overhead, or taking money out while project bills sit unpaid generally qualify. Officers, directors, and agents who participate are personally liable to the beneficiaries, and an intentional diversion left unpaid can carry criminal exposure under the Lien Law.
A beneficiary can compel an accounting before filing suit. On written demand the trustee must furnish a verified statement of the trust or permit examination of the books, and that demand carries procedural requirements that have to be followed exactly. Failing to keep the required records is itself presumptive evidence of a diversion.
Identifiable trust assets are generally not available to the contractor's ordinary creditors in bankruptcy. Those funds remain subject to beneficiary claims rather than passing to general creditors, which puts an unpaid subcontractor in a different position from an ordinary contract claimant, though tracing and commingling affect how the claim is established.
Trust claims reach parties a lien cannot. Where the lien fund owed up the chain is exhausted and the contracting company holds nothing worth collecting, a trust claim reaches the principals who moved the money. Enforcement carries its own conditions, including the requirement that the action proceed as a class action.
Arbitration, Litigation, and Lien Foreclosure Resolve Disputes
Where a construction dispute is heard depends on what the contract says. New York enforces arbitration clauses under a long-standing policy favoring arbitration, and many contracts add mediation as a condition precedent that stays the arbitration or the lawsuit until the parties have met. Skipping a required step can delay a claim or expose it to dismissal.
Lien rights survive the contract's choice of forum. The Lien Law voids an agreement waiving the right to file or enforce a lien in advance, and a dispute resolution procedure that blocks a claimant from filing is unenforceable to that extent. The same reasoning protects a trust claim, which a contract cannot bargain away either.
Arbitration and litigation trade different advantages. Arbitration is private and runs on its own schedule, though document exchange is narrower, which matters where a delay or defect claim turns on volume. Litigation offers full discovery and a public record, with complex construction matters heard in a commercial part.
A lien foreclosure runs as its own judicial action and must be commenced within the lien's one-year life. New York's prompt payment rules void clauses sending a dispute over a New York project to another state's courts, which removes a common tactic in form subcontracts drafted outside the state by upstream parties.
Early Counsel Preserves Lien Deadlines and Notice Rights
Bringing in counsel early protects the legal position while the project stays in motion. The earliest work is operational: reviewing notice obligations and lien enforcement deadlines as they approach, structuring written communications so the claim survives later scrutiny, and flagging termination risk before either side makes a move that cannot be undone.
Once a project closes out, options narrow fast. Missed lien deadlines cannot be revived. Anything not documented during performance, whether a verbal change order or a payment promise made in passing, becomes nearly impossible to prove later. Where immediate relief is needed mid-project, emergency injunctions can hold the line until the merits are heard.
Speak With a Construction Lawyer
Payment claims and lien defense on New York City projects.
Construction Dispute Questions Contractors and Owners Ask
New York City requires a Department of Consumer and Worker Protection home improvement contractor license for residential work costing more than $200. An unlicensed contractor can neither enforce the contract nor recover in quantum meruit for the value of the work, and CPLR 3015(e) subjects a complaint to dismissal where it fails to plead compliance. The bar reaches lien rights as well, so an unlicensed contractor cannot enforce a mechanic's lien for the same work. The requirement excludes new home construction and purely plumbing or electrical work, which run under separate Department of Buildings licenses.
A subcontractor's right to recover against an owner is generally derivative of the general contractor's right to recover. Where the general contractor lacked the license the local law required, courts have held that the subcontractor cannot reach the owner either, leaving the subcontractor to pursue the general contractor directly. Many local ordinances separately require subcontractors in regulated trades to hold their own license or registration. Verifying the license status of the party above before starting work is the practical protection, since the defect surfaces after the money is spent and the work is installed.
Two separate clocks run. Under Lien Law § 11 the notice of lien must be served on the owner within a window that opens five days before filing and closes thirty days after it. Proof of that service must then be filed with the county clerk within thirty-five days after the lien was filed, and a failure to file the proof terminates the lien. Treating the thirty-five day figure as the service deadline is a common and fatal error, because the service window closes first. Both steps are conditions of a valid lien.
Yes. Lien Law § 59 lets an owner, or a contractor above the lienor, serve a written demand requiring the lienor to commence a foreclosure action within a period stated in the demand that cannot be less than thirty days from service, or to show cause why the lien should not be vacated. Personal service of the demand is a statutory requirement. Where the lienor does nothing, the demanding party can obtain an order vacating the lien in a special proceeding. The demand removes the lienor's ability to let a lien sit for its full year.
Generally no. A lien reaches only the funds owed to the party directly above the claimant, so each tier has its own lien fund. Where the owner owed the general contractor nothing at the time the notice of lien was filed, no fund exists for the subcontractor's lien to attach to and the lien is void. The owner does not pay twice for the same work. The subcontractor's recourse then runs against the general contractor directly, and against the trust created by Lien Law Article 3-A, where diverted funds can support a claim against the individuals who moved them.
Recovery turns on critical path proof. A schedule analysis compares the as-planned sequence against the as-built record to isolate which activities drove the completion date and which party caused them. For disruption and lost productivity, a measured mile analysis compares output on impacted work against output on comparable unimpacted work. Contract notice provisions must have been satisfied while the delay was occurring, since a claim raised for the first time at closeout invites the argument that the notice condition was never met. Claims of this kind rarely survive without scheduling expert support.
Generally yes. New York enforces clear no-damage-for-delay provisions, and the party challenging one carries a heavy burden. Recovery remains available in four narrow situations: delay caused by bad faith or willful, malicious, or grossly negligent conduct; delay the parties did not contemplate; delay so unreasonable that it amounts to intentional abandonment of the contract; and delay resulting from breach of a fundamental contractual obligation. Courts read these exceptions narrowly and dismiss claims pleaded in conclusory terms. Relabeling a delay claim as lost productivity does not move it outside the clause.
It depends on the contract and the conduct. Most construction contracts require written authorization signed by a designated representative before extra work is compensable. A course of conduct in which the parties routinely performed and paid for unsigned changes can waive that requirement, and proof of the waiver comes from the project record rather than from testimony about what was said in the field. Contemporaneous documentation of the direction, the party who gave it, the labor and materials used, and the pricing submitted determines whether the extra work is paid.
Construction actions are generally brought in Supreme Court in the county where the property sits, which is also where a lien foreclosure belongs. Venue for an ordinary contract claim can shift under the venue statutes or a contractual provision. Assignment to the Commercial Division depends on the county threshold set by Uniform Rule 202.70, currently $500,000 in New York County, $150,000 in Kings, $100,000 in Queens, and $75,000 in Bronx. Home improvement contracts involving one- to four-unit residences are excluded regardless of the amount.
Generally not. New York follows the American rule, under which each side bears its own fees unless a statute, court rule, or the contract itself provides otherwise. A prevailing party clause in the construction contract is the usual route, and it cuts both ways, since the party that loses may end up paying. The Lien Law provides a separate route where a lien is declared void for willful exaggeration, allowing recovery of the fees spent obtaining the discharge along with bond premiums and the amount of the exaggeration.