Construction Payment Dispute in New York: Legal Steps, Deadlines, and Remedies

Common causes of construction payment disputes include:

• Property owners refusing payment due to alleged defects.
• Disagreement over scope or quality of work.
• Cash flow problems or bankruptcy on the part of the owner.
• Ambiguities in the written contract or lack thereof.

New York law allows contractors to seek payment through breach of contract lawsuits or enforcement of construction liens, depending on the circumstances.

For claims under $25,000, the contractor may file a case in the New York City Civil Court or Small Claims Court, using a simplified process. The steps include:

1. Sending a formal demand letter via certified mail.
2. Optionally filing a mechanic’s lien or pre-judgment attachment.
3. Filing a complaint with the appropriate court.
4. Attending one or more hearings.
5. Receiving a judgment with or without settlement.

This route is often faster and less expensive but still requires documentation and careful preparation.

For larger claims, lawsuits are typically filed in the Supreme Court (trial-level court in New York). The process involves:

1. Drafting and sending a demand letter to establish a record.
2. Filing a formal complaint with attached exhibits (contracts, invoices).
3. Serving the complaint on the property owner (defendant).
4. Defendant submits an answer or counterclaims.
5. The case proceeds through discovery and possibly trial.

In complex disputes, expert testimony and forensic construction analysis may be necessary to prove damages and project scope.

To prove your right to payment, gather:

• Signed contracts or proposals
• Work orders, change orders, and invoices
• Delivery receipts and timesheets
• Photos of completed work
• Communication records (emails, texts)

Sending a certified letter or legal notice prior to filing helps establish that the owner was aware of the debt and had time to pay.

Under New York CPLR § 213(2), breach of contract actions—including construction nonpayment—must be filed within six years from the date the payment became due. This is notably longer than the 3-year period found in some civil law systems like Korea’s. If a judgment is obtained, the enforcement period lasts an additional 20 years.

New York law (CPLR § 5001, § 5004) provides a 9% annual interest rate on unpaid debts unless another rate was agreed upon in writing. The interest applies from the due date of the unpaid invoice until payment is made or judgment is entered.

Draft a contract that includes:

• Clear payment terms and milestones
• Defined scope of work and timeline
• Resolution clauses for disputes
• Provisions for interest or penalties on late payments

Ensure both parties sign and retain copies of all amendments or change orders.

New York allows unpaid contractors to file a Mechanic’s Lien within:

• 8 months of project completion for commercial projects
• 4 months for single-family dwellings

The lien must be enforced through litigation within 1 year of filing or it expires. Filing a lien can often motivate payment before the need for a lawsuit.

Legal counsel can assist with:

• Drafting demand letters or notices of lien
• Navigating the appropriate court process
• Gathering admissible evidence
• Settlement negotiation or trial

Delays in action can jeopardize lien rights or result in forfeiture due to statute expiration.