If you lend money in New York to pay for construction or other improvements to a property, you must file the loan agreement with the county clerk. That agreement is called a building loan contract. It must include the borrower’s sworn statement of the net amount available for the work. It must be filed on or before the day the building loan mortgage is recorded, and any later change must be filed within ten days after it is signed.
If you miss either step, your construction advances lose priority to mechanic’s liens (claims by unpaid contractors and suppliers) filed afterward. The rule is statewide, under New York’s Lien Law. It applies to private and hard-money lenders as much as to banks.
Is your loan a building loan?
Under the Lien Law’s definitions, a building loan contract is a lender’s agreement to advance money to an owner to improve real property. The loan is secured by a mortgage on that property. A building loan mortgage is a mortgage made under that contract.
The label on the loan documents does not decide it. In a 2013 case, New York’s highest court, the Court of Appeals, looked at a $10 million loan that set aside $4.5 million in a restricted account. That money was to be released for improvements to a building. The court held the loan was a building loan contract. The lender had never filed it or its later amendments.
If any part of a mortgage loan is set aside to pay for an improvement and advanced over time, treat that part as a building loan.
Lender checklist
| Step | Requirement |
|---|---|
| Written contract | In writing and acknowledged (signature confirmed before a notary or similar official) |
| Borrower’s sworn statement | Inside the contract |
| Trust fund promise | In the mortgage or the contract |
| File the original | On or before the day the mortgage is recorded |
| Where to file | County clerk, not the register |
| Filing fee | $25; $50 in NYC |
| File changes | Within 10 days of signing |
1. Put the contract in writing and have it acknowledged
The law requires the building loan contract, and any change to it, to be in writing and acknowledged, meaning the signature is formally confirmed before a notary or similar official. Practitioner guidance, such as White and Williams’ Lien Law top ten (2023), describes the agreement as signed and notarized by both borrower and lender.
2. Include the borrower’s sworn statement (the “Section 22 affidavit”)
The contract must contain a true statement under oath, sworn to by the borrower, showing:
- what has been or will be paid for the loan
- all other expenses of the loan, already incurred or still to come
- the net amount available to the borrower for the improvement
Only the borrower swears to it. The lender does not.
Contractors and suppliers rely on that net amount. In the 2013 case, the Court of Appeals said the filing exists so contractors can learn exactly how much the loan actually makes available for the project. An inflated net amount, or one that hides fees and reserves, works against that purpose.
3. Include the trust fund promise
The Lien Law requires a building loan mortgage to include the borrower’s promise to hold the advances as a trust fund, used first to pay the cost of the improvement. A statement that the mortgage is “subject to the trust fund provisions of section thirteen of the lien law” is enough. If the person signing the building loan contract is not the owner, the promise goes in the contract, which must then be signed and filed the same way.
The promise and the filing work together. Advances made before a mechanic’s lien is filed keep priority over that lien only if the mortgage or contract has the promise and the contract was filed as required (Lien Law). Advances made after a notice of lien is filed rank behind that lien in any case.
4. File on or before the day the mortgage is recorded
The deadline is tied to recording, not to closing. Some underwriter manuals describe a ten-day window after closing for the original contract. The law does not say that; its ten-day period applies to changes. Build the filing into the closing package so it goes in no later than the mortgage.
5. File with the county clerk, not the register
File with the clerk of the county where any part of the land is located. The law says a building loan contract or change may not be filed in the register’s office of any county.
This matters in New York City. In Manhattan, Brooklyn, Queens and the Bronx, deeds and mortgages are recorded with the City Register, usually through ACRIS, the city’s online recording system. The building loan contract goes instead to the County Clerk of New York, Kings, Queens or Bronx County. On Staten Island, the Richmond County Clerk handles both. In Westchester and the rest of the state, the county clerk records the mortgage and files the contract. The Kings County Clerk, for example, lists building loan agreements among the documents handled at its block and lot filing window.
Building loan contracts are filed, not recorded, and they do not appear in ACRIS. For more on the City Register and County Clerk split, see How to read ACRIS for title.
The county clerk’s fee is $25, or $50 in counties within New York City. The clerk indexes the contract by borrower name, or by block where it keeps a block index.
6. File every change within ten days
Any change must be in writing, acknowledged and filed within ten days after it is signed. Common triggers are loan increases, budget changes, and changes to fees or reserves that move the net amount available.
Contractors may already have relied on the filed net amount. White and Williams advises against changes after closing that reduce the net amount in the original statement. It recommends an updated statement with each change you file.
In the 2013 case, the lender’s failure to file a March 2008 amendment was a separate violation, on top of the unfiled original agreement.
What happens if the filing is missed
If the contract is not filed, the law puts each party’s interest in the property behind the lien of anyone who later files a mechanic’s lien.
The 2013 case settled how much of the mortgage that reaches. The Court of Appeals limited the penalty to the construction money. The $5.5 million portion used to pay off the existing purchase mortgage kept its priority. That payoff closed before any construction money was advanced and was recorded before any contractor began work.
In practice, a missed filing means:
- construction advances rank behind mechanic’s liens filed later, including liens filed after the money was advanced, which the protection for advances made before a lien is filed (step 3) would otherwise cover
- the lender’s foreclosure recovery on those advances comes after lienholders are paid
- underwriters make insurance of the mortgage’s priority conditional on timely filing, so the loan policy may except (leave out) those liens
Mechanic’s liens are filed with the county clerk, up to eight months after the last work, or four months for a single-family home (Lien Law). A filing problem can surface long after closing.
How title insurers handle building loans
A title company insuring a building loan mortgage will look for two things. One is the recorded mortgage with the trust fund promise. The other is proof that the building loan contract was filed with the county clerk on time. One underwriter’s New York manual, for example, requires timely filing of the contract and amendments, the Lien Law clause, and a pending disbursement clause approved for New York. Without that clause, the policy excepts loss from mechanic’s liens filed after closing.
Under a pending disbursement clause, coverage grows with each advance, and the title search is updated to each payout date to pick up new mechanic’s liens (details below). Requirements differ by underwriter, so confirm them with the title company before closing. Premium questions are covered in Title insurance cost in NYC and Westchester.
If a mechanic’s lien shows up on an updated search before an advance, stop and assess it before funding. Practitioner guidance from White and Williams explains why. Once one contractor files a lien, liens filed later by others are treated, against any money the lender advances after that, as if they had been filed on the first lien’s date. Lawyers call this “relating back.” It leaves the lender’s risk on further advances open-ended.
Related filings that are not the same thing
Notice of lending. A lender may file a notice of lending with the county clerk. It protects the lender against claims that loan repayments it received were trust money the borrower diverted from the project. It does not replace the building loan contract filing, and practitioners disagree on how much protection it adds.
Loan money is trust money. Under the Lien Law’s trust fund rules, money the owner receives under a building loan contract or building loan mortgage is held in trust, and the owner is the trustee. Misusing it is the borrower’s risk, but it is a reason lenders track how each advance was used.
Mortgage recording tax. The building loan mortgage pays recording tax like any other mortgage when recorded. See Mortgage recording tax in NYC and Westchester.
Details for attorneys and title professionals
- Structuring the budget. Items that serve more than one purpose, such as interest reserves and loan fees, need to be allocated deliberately. White and Williams notes that New York construction financings are often split into separate senior (land), building and project loans, each with its own documents. It recommends putting uncertain items in the project loan rather than the building loan. That is a structuring practice, not a legal requirement.
- What is not a change. The law says an assignment of loan money (a transfer of the right to receive it), and certain arrangements covered by a related Lien Law provision, are not treated as changes or new building loan contracts.
- How the 2013 case got there. The trial court had put the entire mortgage behind the liens (2010 decision). The Court of Appeals cut that back to the construction money. A dissenting judge would have put the whole loan behind the liens.
- The ten-day conflict. The underwriter manual linked above describes the ten-day window as running from closing for the original contract. The statute ties the original filing to the mortgage recording date.
- Pending disbursements. Under a pending disbursement clause, the title search is brought up to date at each payout. TIRSA (the Title Insurance Rate Service Association) publishes a Construction Loan Policy Endorsement, an add-on that moves the policy’s effective date forward after an updated title search.
Official sources
- Lien Law § 2 (definitions, including subdivisions 13 and 14)
- Lien Law § 10 (filing period for mechanic’s liens)
- Lien Law § 13 (priority; trust fund covenant)
- Lien Law § 22 (building loan contract)
- Lien Law § 26 (assignments of loan moneys)
- Lien Law § 70 (trust funds)
- Lien Law § 73 (notice of lending)
- Altshuler Shaham Provident Funds, Ltd. v GML Tower, LLC, 21 NY3d 352 (2013)
- Kings County Clerk: liens and block and lot filings