2023 New York Laws › LIE - Lien › Article 2 - Mechanics' Liens › 13 - Priority of Liens.

13.  Priority  of  liens.  (1) A lien for materials furnished or labor
performed in the improvement of real property shall have priority over a
conveyance, mortgage, judgment or other claim against such property  not
recorded,  docketed  or filed at the time of the filing of the notice of
such lien, except as hereinafter in this chapter provided; over advances
made upon any mortgage or other encumbrance thereon after  such  filing,
except  as hereinafter in this article provided; and over the claim of a
creditor who has not furnished materials or performed  labor  upon  such
property,  if  such property has been assigned by the owner by a general
assignment for the benefit of creditors, within thirty days  before  the
filing  of either of such notices; and also over an attachment hereafter
issued or a money judgment hereafter recovered upon a claim,  which,  in
whole  or  in  part, was not for materials furnished, labor performed or
moneys advanced for the improvement of such real property; and over  any
claim or lien acquired in any proceedings upon such judgment. Such liens
shall  also have priority over advances made upon a contract by an owner
for an improvement of real property which  contains  an  option  to  the
contractor,  his  successor or assigns to purchase the property, if such
advances were made after the time when the labor began or the first item
of material was furnished, as stated in the notice of lien.  If  several
buildings  are  demolished,  erected,  altered  or  repaired, or several
pieces or parcels of real property are improved, under one contract, and
there are conflicting liens thereon, each  lienor  shall  have  priority
upon  the  particular  part  of the real property or upon the particular
building or premises where his labor is performed or his  materials  are
used.  Persons  shall  have no priority on account of the time of filing
their respective notices of liens, but all liens shall be  on  a  parity
except as hereinafter in section fifty-six of this chapter provided; and
except  that  in all cases laborers for daily or weekly wages shall have
preference over all other claimants under this article.
(1-a) Parties having assignments of moneys due or to become due  under
a contract for the improvement of real property, unless such assignments
be  set  aside  as  diversions  of  trust  assets as provided in article
three-a of this chapter, shall have priority as follows:
An assignee of moneys or any part thereof, due or to become due  under
a  contract  for  the  improvement of real property, whose assignment is
duly filed prior to the filing of a notice  of  lien  or  assignment  of
every  other party to the action, shall have priority over those parties
to the extent of moneys advanced upon such assignment before the  filing
of  the  notice of lien or assignment next subsequent to his assignment,
but as to moneys advanced subsequent to a notice of lien  or  assignment
filed and unsatisfied or not discharged such assignee for the purpose of
determining his proportionate share of moneys available for distribution
as  provided  in  subdivision  one of this section shall be treated as a
lienor having a lien to the extent of moneys so advanced.
An assignee of moneys or any part thereof, due or to become due  under
a  contract for an improvement of real property whose assignment is duly
filed subsequent to the filing of the notice of lien  or  assignment  of
any  other  party shall for the purpose of determining his proportionate
share of moneys available for distribution, as provided  in  subdivision
one  of  this section be treated as a lienor having a lien to the extent
of moneys actually advanced upon such assignment  prior  to  the  filing
thereof.
(2)  When  a  building  loan mortgage is delivered and recorded a lien
shall have priority over advances made on  the  building  loan  mortgage
after the filing of the notice of lien; but such building loan mortgage,
whenever  recorded,  to the extent of advances made before the filing of
such notice of lien, shall have priority over the lien, provided  it  or

the building loan contract contains the covenant required by subdivision
three  hereof,  and  provided  the  building  loan  contract is filed as
required by section twenty-two of this chapter. Every mortgage  recorded
subsequent  to  the  commencement  of  the  improvement  and  before the
expiration of the period specified in section ten of  this  chapter  for
filing  of notice of lien after the completion of the improvement shall,
to the extent of advances made before the filing of a  notice  of  lien,
have  priority  over  liens thereafter filed if it contains the covenant
required by subdivision three hereof. The lien  of  a  vendee  under  an
executory  contract  for the sale of land and the improvement thereof by
the construction of a building thereon shall, to the extent  of  amounts
paid  thereunder  to  the  vendor before the filing of a notice of lien,
have priority over liens filed after the contract or memorandum  thereof
is  recorded  as provided in section two hundred ninety-four of the real
property law if the recorded contract or memorandum specifies the  total
amount  of payments made by the vendee or required by the contract to be
made by the vendee before conveyance of title.
(3) Every such building loan  mortgage  and  every  mortgage  recorded
subsequent  to  the  commencement  of  the  improvement  and  before the
expiration of the period specified in section ten of  this  chapter  for
filing  of  notice of lien after the completion of the improvement shall
contain a covenant by the mortgagor that he will  receive  the  advances
secured  thereby  and  will hold the right to receive such advances as a
trust fund to be applied first for the purpose of  paying  the  cost  of
improvement, and that he will apply the same first to the payment of the
cost  of  improvement before using any part of the total of the same for
any other purpose, provided, however, that if the  party  executing  the
building  loan  contract is not the owner of the fee but is the party to
whom such advances are to be made, a building loan contract executed and
filed pursuant to section twenty-two of this chapter shall  contain  the
said  covenant  by  such party executing such building loan contract, in
place of the covenant by the mortgagor in the building loan mortgage  as
hereinbefore  provided.  Nothing in this subdivision shall be considered
as imposing upon  the  lender  any  obligation  to  see  to  the  proper
application  of such advances by the owner; and nothing in this section,
nor in that portion of section two of this chapter,  defining  "cost  of
improvement"  shall  be  deemed to impair or subordinate the lien of any
mortgage containing the covenant required by this  subdivision.  To  the
extent  that  the trust res consists of the right to receive advances as
distinct from advances actually received, breach of the trust shall give
rise to a civil action only. The covenant provided for herein  shall  be
deemed  to have been made and to be in full force and effect if, in lieu
of the foregoing provisions, a statement in substantially the  following
form  is  contained  in  the mortgage or contract, "subject to the trust
fund provisions of section thirteen of the lien law."
(4) Nothing in subdivision two or three of this section shall apply to
any mortgage given by a purchaser for value from  an  owner  making  the
improvement  and recorded prior to the filing of a lien pursuant to this
chapter, provided the instrument of conveyance contains  the  provisions
mentioned in subdivision five herein.
(5)   No   instrument   of   conveyance  recorded  subsequent  to  the
commencement of the improvement, and before the expiration of the period
specified in section ten of this chapter for filing of  notice  of  lien
after the completion of the improvement, shall be valid as against liens
filed  within a corresponding period of time measured from the recording
of such conveyance, unless the instrument contains  a  covenant  by  the
grantor  that  he will receive the consideration for such conveyance and
will hold the right to receive such consideration as a trust fund to  be

applied  first for the purpose of paying the cost of the improvement and
that he will apply the same first to the payment  of  the  cost  of  the
improvement before using any part of the total of the same for any other
purpose. Nothing in this subdivision shall be construed as imposing upon
the  grantee  any  obligation  to  see to the proper application of such
consideration by the grantor. Nothing in this subdivision shall apply to
a deed given by a referee or other person appointed by the court for the
sole purpose of selling real property. Nothing in this subdivision shall
apply to the consideration received by a  grantor  who,  pursuant  to  a
written   agreement   entered  into  and  duly  recorded  prior  to  the
commencement of the improvement,  conveys  to  the  person  making  such
improvement, the land upon which such improvement is made. However, such
a  conveyance shall be subject to liens filed prior thereto, as provided
by this chapter. To the extent that the trust res consists of the  right
to  receive  the  consideration for such conveyance as distinct from the
consideration actually received, breach of the trust shall give rise  to
a civil action only. The covenant provided for herein shall be deemed to
have  been  made  and  to be in full force and effect if, in lieu of the
foregoing provisions, a statement in substantially the following form is
contained in the instrument of conveyance, "subject to  the  trust  fund
provisions of section thirteen of the lien law."
Except  that this section shall not apply to any mortgage taken by the
home owners' loan corporation, a corporation created  under  an  act  of
congress,  known  as  the  "home  owners'  loan  act of nineteen hundred
thirty-three," and the  "home  owners'  loan  act  of  nineteen  hundred
thirty-three as amended," and said mortgage shall have priority over any
and  all  liens  filed  subsequent  to the date of the recording of said
mortgage whether or not the cash and/or bonds for  which  said  mortgage
has  been taken as security, shall have been advanced at the time of the
execution of such mortgage or subsequent thereto, and it  shall  not  be
necessary  to  execute  and file any building loan contract or any other
contract, in compliance with this section or any part thereof.
(6) Every assignment of moneys, or any part thereof, due or to  become
due  under a contract for the improvement of real property shall contain
a covenant by the assignor that he  will  receive  any  moneys  advanced
thereunder  by  the  assignee  and  will  hold the right to receive such
moneys as trust funds to be first applied to the payment of trust claims
as defined in section seventy-one of the lien  law,  and  that  he  will
apply  the  same  to  such  payments  only, before using any part of the
moneys for any other purpose.