Governors across the U.S. are closing nonessential businesses to help control the spread of the coronavirus (COVID-19). But the definition of "nonessential" varies from state to state and even from county to county, especially when it comes to the construction industry. Announcements from the government are challenging workers and business owners on a daily basis with the rollout of new executive orders. However, while the executive orders are meant to save lives, and everyone hopes that is the case, there is still a real-life strain on the economy, which is costing employees jobs and businesses revenue.
The type of construction project is also important when it comes to determining if work is considered nonessential. Earlier this month, Boston suspended nonessential construction, but allowed emergency construction to continue—road and building work, gas leaks and health care facilities, among others. San Francisco County suspended all private construction, while public works and essential infrastructure could continue. Colorado's San Miguel County shut down all construction minus limited essential building. Meanwhile, in New York, one of the most impacted places in the U.S., construction has been allowed to continue as an essential business.
However, earlier this month, New York Gov. Cuomo issued Executive Order No. 202 to declare a disaster emergency in the state, which gives him the power to suspend or modify statutes. To help combat the COVID-19 pandemic, specific time limits for the commencement and filing of legal action, notice or motion among other processes is "tolled from the date of this executive order [March 7, 2020] until April 19, 2020."
In New York State, courts are shut down except for essential purposes such as criminal matters—arraignments, bail applications, etc.—and family court proceedings including child protective matters among other deemed essential proceedings. The governor's executive order suspends statutes of limitations in legal matters, and no paper or electronic filings will be accepted except for the established essential matters.
"While we continue to remain open, all nonessential functions of the courts will be postponed," said New York Court of Appeals Chief Judge Janet DiFiore in a statement. "All essential functions of the courts remain available to ensure that New Yorkers may access the justice system during this extremely challenging time."
Meaning, while construction has continued, there could be future issues for those in the industry. "I have been proceeding as usual. I have been sending out liens as usual, but now I am sending them out overnight FedEx since people don't have to sign for documents—I will have proof of delivery," said Kevin Laurilliard, shareholder with McNamee Lochner P.C. "When someone on the other end processes them is beyond my control. At least I can show I served the general contractor and owner or whoever I have to legally serve. I can show that it was sent for filing to the county clerk's office."
By processing the required documents, potential lien claimants can show everything was timely; the fact that people on the other end do not open or file the documents is beyond the claimants' control. "Recipients at the county clerk's office may not open liens and process them for a long time," he added.
In a time when the world is panicking, Laurilliard's best advice was to not panic. "You can't control what the courts will decide, but at least the courts will not be able to say you didn't do everything to comply with the law. It's really just a complete unknown. Control what you can control, and that's getting paperwork out the door. From there, I expect significant delays."
It's always better to get mechanics' liens out sooner rather than later because of the derivative rule, Laurilliard said. "In New York, a lien is enforceable only to the extent that there's money still owed on the contracts. If you're a supplier, there's an even longer chain of command; you want to catch money still owed to the subcontractor and general contractor. You want the lien to be able to attach to money still owed. The derivative rule is not applicable with a payment bond, but you rarely see a bond on private projects—bonds are mandatory on public projects for the most part."
The executive order and administrative order from the chief judge would apply if a lien claimant's one-year deadline to foreclose on a lien falls within the timeframe of the orders since documents—paper and electronic—are only being accepted for essential matters. "Those orders deal with filings to court and the statute of limitations. I cannot predict with certainty the future decisions from courts relating to these issues, but think their decisions are going to be fine and protect the laudable goals that contractors, laborers and suppliers should get paid," Laurilliard concluded.
-Michael Miller, managing editor