Quinlan Ferrara Electric wired a restaurant in a shopping plaza in Webster, New York. The work was done properly and nobody argued otherwise. Peaches Café opened, closed, and left owing the electrician more than $50,000. Ferrara had no contract with the landlord, had never dealt with the landlord, and had taken the tenant’s credit rather than the owner’s. The lien went on the landlord’s property anyway. On 20 November 2018 a unanimous New York Court of Appeals held that was correct, and the reason was sitting in the lease.[1]
Whether a tenant’s unpaid contractor can reach the landlord’s fee estate is settled by the alterations clause and the construction exhibit, not by the lien statute. A clause that requires the build-out, specifies the work, approves the contractors, and keeps the improvements at the end of the term is the same evidence a court uses to find that the landlord consented to the work. A clause that merely permits the build-out usually is not.
New York infers consent from the lease, and the lease in Ferrara was very detailed. COR leased vanilla-box space in the plaza to Peaches under a 10-year lease with a Retail Construction Exhibit. Peaches “shall retain competent and skilled contractors”; “shall use only contractors approved by” COR; shall submit design drawings that “shall include” electrical plans; those drawings “shall be revised” if COR wanted changes; the improvements became part of the realty at the end of the term. The exhibit specified the service type, the panel board and the electrical system. The lease gave Peaches 90 days to substantially complete, started rent at the end of that period whether the work was finished or not, and required the restaurant to be open Monday through Saturday 7:00 a.m. to 6:00 p.m. and Sunday 7:00 a.m. to 3:00 p.m. Judge Wilson, writing for all seven judges, held the electrical work was not merely authorized but required “to effectuate the purpose of the lease,” and that COR retained “close supervision over the work.” That is consent under Lien Law § 3, and no direct relationship between owner and contractor is needed to establish it.[1]
The clause landlords point to when this happens is an indemnity, and an indemnity does not bind the contractor. COR’s lease disclaimed liability for mechanic’s liens arising from Peaches’ work. The Appellate Division, Fourth Department, had already disposed of that in April 2016: the provision “is merely an indemnification clause, and it has no bearing on whether defendant consented to the improvements for purposes of section 3.” It quoted a rule from 1932 that still does most of the work here, that once owner and tenant “have given their consent to an improvement, they cannot by any arrangement among themselves cut off the rights of lienors."[2] California says the same thing by statute. Civil Code § 8122 makes any contract term by which an owner purports to waive or impair another claimant’s lien rights void and unenforceable until the claimant itself signs a release.[3] A no-lien covenant is a promise your tenant owes you. It is not a defense against the electrician.
California gives landlords a notice to record, then a doctrine that takes most of it back. Civil Code § 8442(b) subjects a non-contracting owner’s interest to the lien where the work was done with that owner’s knowledge, unless the owner gives notice of nonresponsibility. Section 8444 sets the terms: signed and verified by the owner, stating the nature of the owner’s interest, naming the lessee, declaring non-responsibility, and, critically, both posted at the site and recorded within 10 days after the owner first has knowledge of the work.[4] Then there is the participating owner doctrine. In Howard S. Wright Construction Co. v. Superior Court, BBIC Investors had recorded a notice of nonresponsibility on a warehouse at 2201 Poplar Street in Oakland that it had leased to 360networks on a 15-year lease restricted to telecommunications use. The conversion ran a budget of roughly $5.2 million across about 22,500 square feet. BBIC approved the plans and specifications and collected $5,000 a month for overseeing the construction. The tenant went into Chapter 11 on 28 June 2001, eight days after Wright recorded a lien for $2,452,412. The First District, Division Five, held in 2003 that Wright had shown the probable validity of that lien, because the improvements were a practical necessity for the only use the lease allowed, and issued a writ directing the trial court to vacate its orders expunging the lien and the lis pendens. Whether BBIC was actually a participating owner was left for trial.[5] A later appeal in the same fight turned on timing and held the lien was recorded in time, because 360networks’ statement on 18 and 19 June 2001 that it would not pay on any of its contracts for at least 30 days was an anticipatory repudiation that completed the contract.[6]
Nevada runs the same clock in three days and then makes the landlord’s protection depend on the tenant’s paperwork. Under NRS 108.234 a landlord has three days from learning of the work, and for a lessor the notice is timely only if recorded within three days after the lease’s effective date or by the time everyone signs, whichever comes first. So the practical deadline is the lease signing, not the day the contractor shows up. The notice must say whether the landlord told the lessee in writing to comply with NRS 108.2403, and it has to be served on the lessee within 10 days of recording and on the prime contractor within 10 days of the tenant signing the construction contract. Then the sting: the statute’s definition of a “disinterested owner” excludes “an owner who is a lessor if the lessee fails to satisfy the requirements set forth in NRS 108.2403 and 108.2407.” Those requirements are the tenant’s, not the landlord’s, and they are not small. Before starting work the tenant must record a notice of posted security and either fund a construction disbursement account for the full cost of the improvement, never less than the prime contract, with a construction control administering it, or record a surety bond for the prime contract.[7] A Nevada landlord can do everything § 108.234 asks and still lose the protection because its tenant skipped a recording.
Cross the state line and the answer changes again. Oregon gives landlords a notice of non-responsibility that must be posted in a conspicuous place within three days of learning about the construction, under ORS 87.010(1) and 87.030(1). Washington has no such mechanism at all: whether the lien attaches to the owner’s interest or stops at the leasehold turns on whether the lease obligated the tenant to do the work, which makes the tenant the owner’s construction agent.[8] The same alterations clause, copied into four leases in four states, produces four different answers about who owns the risk. Most national landlords are running one form.
The number on the lien is not the number at risk. California Civil Code § 8450 gives a mechanic’s lien priority over any mortgage or deed of trust that attached after commencement of the work of improvement. A direct contractor has until the earlier of 90 days after completion or 60 days after a recorded notice of completion to record; everyone below has 90 days after completion or 30 days after that notice. Then 90 days from recording to sue, or the lien expires. To clear title in the meantime, somebody records a lien release bond at 125% of the claim.[9] Add it up from the landlord’s side: a five-figure claim by a subcontractor you have never met sits ahead of your lender, shows up on title, and runs into the covenant in your loan documents that says the property stays free of liens. The bond premium is the cheap part.
Build-outs got more expensive and slower to pay for in the same year. JLL’s 2026 fit-out guide puts a medium-quality corporate office fit-out in the U.S. and Canada at $295 a square foot, with a typical range of $230 to $375 and a full spread of $170 to $425 depending on layout. North America is the most expensive region in the survey of 68 cities. Security, IT and AV costs rose a median 8% year over year, and the guide’s summary of the region is that tariffs “have reset the cost floor for construction materials."[10] At the other end of the chain, Siteline surveyed 492 construction finance and operations people in May 2026: 92% of subcontractors had floated payroll out of their own pockets while waiting to be paid, 43% waited more than 90 days for final payment and retainage against 15% of general contractors, and 56% had missed a critical mechanic’s lien deadline in the previous two years.[11] Bigger build-outs, thinner subcontractors, and a lot of people who now watch lien deadlines closely.
Requiring lien waivers with every draw is the standard answer, and it belongs in the tenant improvement allowance disbursement schedule rather than in the collections strategy afterward. It only works if the money is still moving. A tenant who runs out halfway through the build-out has no more draws to condition, which is the moment the alterations clause you signed months earlier starts doing all the work. The work letter decides who eats a cost overrun. The alterations clause decides whose building the unpaid contractor forecloses on.
Reading the alterations clause the way a lien claimant will#
Acrebase pulls the alterations and construction provisions out of every lease in a portfolio and lines up the facts a court looks at: whether the improvements are required or permitted, whether the landlord approves plans and contractors, whether it charges a construction supervision fee, whether the improvements revert at the end of the term, whether the tenant must bond or insure the work, and whether there is a no-lien covenant that only functions as an indemnity. Those are the same items that decided Ferrara and put BBIC’s $2.4 million lien back in play. For an owner with leases in California, Nevada, Oregon and Washington, the clause library and negotiation playbook hold the state-specific fallback language, so the Nevada lease does not go out with the California alterations clause in it and a three-day deadline nobody is watching.
If you are a landlord, decide whether your lease requires the improvements or permits them, and write it that way on purpose. Build the notice of nonresponsibility into the lease-signing checklist rather than the construction kickoff, because in Nevada you have already missed it by then. Ask for a payment bond or a funded disbursement account on any build-out large enough to hurt, require conditional and unconditional lien waivers at each draw, and keep a bonding-off right in your back pocket. If you are a tenant, the landlord’s approval rights over your plans and contractors are the same facts that put its property on the hook, which is worth knowing when it asks you to indemnify it for the consequences. Negotiate a reasonable window to discharge or bond around any lien before it becomes a default, and check what that window actually is in your current lease. It is often ten days.
Footnotes
[1] Ferrara v Peaches Café LLC, 32 NY3d 348, 2018 NY Slip Op 07925 (N.Y. Ct. App.), argued 17 October 2018, decided 20 November 2018, opinion by Wilson, J., with Chief Judge DiFiore and Judges Rivera, Stein, Fahey, Garcia and Feinman concurring; affirming 138 AD3d 1391. Peaches closed owing Ferrara’s assignor more than $50,000; the 10-year lease and attached Retail Construction Exhibit required Peaches to retain contractors approved by COR, submit design drawings including electrical plans subject to COR’s revision and approval, complete within 90 days with rent commencing at the end of that period regardless, operate Monday through Saturday 7:00 a.m. to 6:00 p.m. and Sunday 7:00 a.m. to 3:00 p.m., and surrender the improvements as part of the realty. Consent under Lien Law § 3 may be inferred from the terms of the lease, and Appellate Division decisions requiring a direct relationship between landlord and contractor “are contrary to our precedents and should not be followed.” https://www.courtlistener.com/opinion/10688529/ferrara-v-peaches-cafe-llc/
[2] Ferrara v Peaches Café LLC, 138 AD3d 1391 (4th Dept, 29 April 2016), No. 190 CA 15-01346 — reversing and granting the electrician partial summary judgment; rejecting the contention that the owner’s responsibility under Lien Law § 3 is extinguished by a lease provision disclaiming liability for mechanic’s liens, because that provision “is merely an indemnification clause,” and quoting Grassi & Bro. v Lovisa & Pistoresi, Inc., 259 NY 417, 423, quoting McNulty Bros. v Offerman, 221 NY 98, 105. https://www.courtlistener.com/opinion/4303977/ferrara-angelo-a-v-peaches-cafe-llc/
[3] Cal. Civ. Code § 8122 — an owner, direct contractor or subcontractor “may not, by contract or otherwise, waive, affect, or impair any other claimant’s rights under this part, whether with or without notice, and any term of a contract that purports to do so is void and unenforceable unless and until the claimant executes and delivers a waiver and release under this article.” https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=CIV§ionNum=8122.
[4] Cal. Civ. Code § 8442(b) (interest of a person that did not contract for the work is subject to the lien if the work was provided with that person’s knowledge, unless a notice of nonresponsibility is given) and § 8444 (contents, verification, and the requirement that the notice be both posted and recorded within 10 days after the person giving it has knowledge of the work of improvement). https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=CIV§ionNum=8444.
[5] Howard S. Wright Construction Co. v. Superior Court (2003) 106 Cal.App.4th 314, No. A099318, Court of Appeal, First District, Division Five, Jones, P.J., with Stevens and Gemello, JJ., concurring — writ relief from orders expunging a $2.4 million mechanic’s lien and a notice of lis pendens on property owned by BBIC Investors, LLC and leased to 360networks under a 15-year lease restricted to telecommunications use; BBIC approved plans and specifications and collected a $5,000 monthly administrative fee for overseeing construction; the court found the claimant had established the probable validity of its lien on a participating owner theory notwithstanding BBIC’s recorded notice of nonresponsibility, and issued a peremptory writ of mandate directing the superior court to vacate both orders. https://caselaw.findlaw.com/court/ca-court-of-appeal/1330773.html
[6] Howard S. Wright Construction Co. v. BBIC Investors, LLC (2006) 136 Cal.App.4th 228, No. A109876, decided 31 January 2006 — warehouse at 2201 Poplar Street, Oakland; conversion of roughly 22,500 square feet into an internet facility on a budget of about $5.2 million; 360networks placed the project on hold 10 May 2001 and announced on 18 and 19 June 2001 that it would make no payments on any of its contracts for at least 30 days; Wright withdrew its workers 19 June and recorded a lien for $2,452,412 on 20 June; 360networks filed Chapter 11 on 28 June. Held the anticipatory repudiation completed the contract for lien purposes, so the recording was timely. https://caselaw.findlaw.com/court/ca-court-of-appeal/1119018.html
[7] Nev. Rev. Stat. § 108.234 (notice of nonresponsibility by a disinterested owner: three days from knowledge, and for a lessor deemed timely only if recorded within three days after the lease’s effective date or by execution of the lease by all parties, whichever occurs first; required contents including whether the lessee was notified in writing to comply with NRS 108.2403; service on the lessee within 10 days of recording and on the prime contractor within 10 days of the lessee’s contract; an owner who does not comply “may not assert any claim” of immunity; “disinterested owner” does not include “an owner who is a lessor if the lessee fails to satisfy the requirements set forth in NRS 108.2403 and 108.2407”) and § 108.2403 (before a lessee may cause a work of improvement, it must record a notice of posted security and either fund a construction disbursement account in an amount equal to the total cost of the work, and in no event less than the total amount of the prime contract, administered by a construction control, or record a surety bond for the prime contract). https://www.leg.state.nv.us/NRS/NRS-108.html
[8] Miller Nash LLP, “Lien Rights on Tenant Improvement Work: A Cross-Jurisdictional Perspective” — Oregon requires the landlord’s notice of non-responsibility to be posted in a conspicuous place within three days after the owner obtains knowledge of the construction, under ORS 87.010(1) and ORS 87.030(1); Washington, under RCW 60.04.021, offers no statutory notice mechanism, and whether the lien attaches to the owner’s interest depends on whether the lease requires the tenant to make the improvements. https://www.millernash.com/industry-news/lien-rights-on-tenant-improvement-work-a-cross-jurisdictional-perspective
[9] Cal. Civ. Code § 8450(a) (lien priority over encumbrances attaching after commencement of the work of improvement), § 8412 (direct contractor must record before the earlier of 90 days after completion or 60 days after a recorded notice of completion or cessation), § 8414 (other claimants: 90 days after completion or 30 days after that notice), § 8460(a) (action to enforce within 90 days after recordation or the lien expires), and § 8424(b) (lien release bond in an amount equal to 125 percent of the claim, executed by an admitted surety insurer). https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=CIV§ionNum=8450.
[10] JLL, U.S. and Canada Office Fit-Out Costs Guide 2026 and Global Office Fit-Out Costs Guide 2026 — regional average of $295 per square foot for a medium-quality corporate office fit-out, typical range $230 to $375 and full range $170 to $425 by typology and quality tier; North America the most expensive region against a global benchmark of about $205 per square foot; median year-over-year increase of 8% in security, IT and AV; survey covering 68 cities across 40 countries; “Tariffs have reset the cost floor for construction materials across the region.” https://www.jll.com/en-us/guides/us-canada-office-fit-out-costs-guide
[11] Siteline, State of Subcontractor Billing in 2026, surveying 492 construction finance and operations professionals in May 2026, reported in Contractor magazine, “Subcontractors are Still Financing Their Own Jobs, 2026 Survey Finds” — 92% of subcontractors floated payroll from their own pockets while waiting for payment, 28% of them in most months; 43% waited more than 90 days for final payment and retainage against 15% of general contractors, with nearly one in five waiting six months or longer; 56% had missed a critical mechanic’s lien deadline in the previous two years; 67% spent 11 or more hours a month preparing, submitting and tracking pay applications. https://www.contractormag.com/management/news/55403190/subcontractors-are-still-financing-their-own-jobs-2026-survey-finds
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