It may seem like rare circumstances, but construction improvements for private enterprises upon public property is more common that you think. States, counties and cities frequently lease out public land to private companies to do a variety of things (airports, for example, lease to airlines and vendors). These private tenants hire companies to make tenant improvements, and when those companies go unpaid, they look to the lien and bond claim laws and find themselves in-between regulations.
We wrote about the issue in a post a few years back titled Is Your Project Private, State, Federal or Something Different? Impressively, Oklahoma just two weeks ago became the first state to address the issue head-on by passing Senate Bill 1053, which makes the state’s Little Miller Act applicable to private construction on public land.
Not only is the situation overlooked in the construction industry, but it is a drastically misunderstood situation.
In some states, claimants can file a mechanics lien against the private company’s leasehold interest in the property. But this is not the case in all states, especially New York, where the courts have specifically addressed the matter and ruled that unpaid contractors and suppliers are simply unfortunately between rules.
The case in question was Paerdegat Boat & Racquet Club, Inc. v. Zarrelli, 57 N.Y.2d 966 (N.Y. 1982), where the court concluded:
[T]hat the property against which the mechanic’s lien was asserted was exempt from such a lien since the realty was owned by the City of New York and a mechanic’s lien may not attach to city-owned property nor to the improvements erected thereon, and that Paerdegat’s leasehold interest in the city-owned land was similarly exempt.
So, to answer the question of this post, until future legislation changes this precedent, those performing work or furnishing materials to a private company improving public property will not have any mechanics lien rights in New York.