Requires a surety bond for contractors and subcontractors where no public fund has been established for the financing of a public improvement

• Democratic5

◆ The sponsor's argument

Why Patricia Fahy says this is needed

Prior to 2004, subcontractors performing work on private projects could file mechanic's liens if they were not paid for the work performed on the project. On public projects, unpaid subcontractors could file a public improvement lien, which attached to the public fund set up to pay for the project. However, the Lien Law had a "gap" in payment protection, in that subcontractors performing work on "hybrid" projects being built by private developers with private funds, but on public land, could not file liens against the public land or the private enti- ty's leasehold interest. In 2003, legislation amending Section 5 of the Lien Law was introduced to provide payment security to contractors and subcontractors on such hybrid projects. However, in '2018 the NYS Court of Appeals affirmed an Appellate Division, First Department decision which effectively made the 2004 amendment to the Lien Law meaningless because a "completion guaran- tee" provided to the public entity provides no payment security whatso- ever to the contractors and subcontractors performing work on the project. It merely provides a guarantee to the public entity that the project will be completed. Judge Judith Gische, who partially dissented in the First Department decision, wrote that a completion guarantee is not a form of undertaking that satisfies the Lien Law. In her dissent she states in part: "In order to achieve the objective of the Lien Law, and consistent with the legislative history of the amendment, any alternative undertaking must provide substantially equivalent protection to that provided by a bond. The alternative undertaking should be a financial arrangement that would afford an unpaid contractor, subcontractor, laborer or provider of materials, a fund of money, or an asset, available for predictable and prompt payment...The completion guarantee is not the functional equiv- alent of a bond or other form of undertaking..." The Legislature never intended for contractors, subcontractors, materi- almen and workers to be left without payment protection simply because a private developer enters into a ground lease agreement with a public entity. This legislation would require that a payment bond, letter of credit or other equivalent form of payment security be posted by the private developer on projects costing more than $250,000, which would provide all parties supplying labor and/or materials to the project some measure of protection against non-payment for work performed and/or material delivered.

This is the sponsor's own case for the bill, quoted from their memorandum. It is not Agora's description of what the bill does.