Recent decisions from New York’s appellate courts are sending a clear message to owners, contractors, and developers: mechanic’s lien and trust protections are being enforced strictly, even in post-settlement and summary judgment contexts.
In two late-2025 rulings—one from the Second Department and one from the Third Department—the courts clarified (1) what qualifies as owner “consent” under the New York Lien Law and (2) when settlement proceeds become trust assets under Article 3-A. These decisions should influence how construction projects and disputes are negotiated and defended.
If you haven’t already, check out my prior post on the upcoming NY mechanic’s lien amendments here:
🔗 Upcoming NY Mechanic’s Lien Amendments to Watch (January 2026)
Owner “Consent” Under Lien Law § 3 Requires Affirmative Conduct
In Quality Aggregates, Inc. v. Prime Mix Corp. (Second Department, Dec. 10, 2025), the court rejected an owner’s summary judgment defense that work was unauthorized and the owner didn’t consent. The owner submitted uncertified DOB extracts and a denial affidavit, but the appellate panel held this was insufficient.
🔗 Quality Aggregates, Inc. v. Prime Mix Corp. (Second Dept. 2025)
What the court said:
To invoke the owner consent exemption in Lien Law § 3, the owner must show affirmative evidence of non-consent—not merely a conclusory denial or uncertified records. Passive awareness of ongoing work does not automatically negate lien rights.
This confirms that owner consent is a fact-sensitive inquiry requiring more than procedural formality at the motion stage.
Article 3-A Trust Claims: Why They Matter
At the heart of New York’s protections for construction claimants is Article 3-A of the New York Lien Law, codified at §§ 70–76 of the statute.
🔗 New York Lien Law Article 3-A (sections 70–76)
Under Article 3-A, funds paid or payable “under or in connection with” a contract for an improvement are impressed with a statutory trust for the benefit of subcontractors, laborers, and material suppliers—not just the immediate payee. Once earned, these funds are trust assets rather than ordinary contractual payments.
Why this matters:
- Trust assets must be preserved and applied first to those who supplied labor and materials.
- Contractors and owners become statutory trustees, with fiduciary obligations.
- Misuse of trust funds can result in injunctions, accounting orders, and personal liability—even beyond the direct contract amount.
- Unlike liens, trust claims are not limited by property ownership status or consent issues.
In practice, Article 3-A claims often carry more leverage than mechanic’s liens alone—and are frequently asserted alongside or instead of lien foreclosures in construction litigation.
Settlement Proceeds Are Article 3-A Trust Assets
In L.C. Whitford Co. v. Babcock & Wilcox Solar Energy, Inc. (Third Department, Dec. 18, 2025), the court tackled a common but under-addressed issue: whether settlement proceeds received by a general contractor remain trust funds.
🔗 L.C. Whitford Co. v. Babcock & Wilcox Solar Energy, Inc. (Third Dept. 2025)
The answer: Yes. The court held that proceeds paid to a GC “in connection with” an improvement—whether as progress payments, insurance recoveries, or settlement funds—remain subject to Article 3-A trust rules.
What this means:
Contractors acting as trustees cannot divert settlement funds to reimburse internal costs before paying subcontractors, suppliers, or other trust beneficiaries. Even after litigation ends, the statutory trust continues to control the disposition of those proceeds until all valid trust claims are satisfied.
Practical Takeaways for Owners, Developers, and Contractors
- Owner consent defenses are no longer sui generis: Proof must show affirmative conduct or explicit non-consent to avoid lien rights.
- Settlement and insurance funds can’t be treated as free cash: They may still be subject to Article 3-A trust duties.
- Contractors are fiduciaries: Trust beneficiaries have priority; reimbursement follows only after beneficiaries are paid.
- Lien Law § 3 and Article 3-A work together: Consent issues address lien scope, while trust rules govern fund handling and priority.
Final Thoughts
Whether you’re drafting contracts, negotiating project settlements, or facing enforcement actions, both owner consent analysis and Article 3-A trust compliance should be treated as front-end risk issues—not afterthoughts. These appellate rulings reaffirm that New York courts will enforce statutory protections rigorously.