In New York, a lender that funds construction or other improvements to real property must file the building loan contract, including the borrower’s sworn statement of the net sum available for the improvement, with the county clerk on or before the day the building loan mortgage is recorded. Any later modification must be filed within ten days after it is signed. If the lender misses either step, the construction advances lose priority to mechanic’s liens filed afterward. This rule is statewide, under Lien Law § 22, and it applies to private and hard-money lenders as much as to banks.
This guide covers what counts as a building loan contract, what the filing must contain, where it goes (including the New York City exception that catches out-of-state counsel), how modifications work, and what a missed filing costs.
Is your loan a building loan contract?
Lien Law § 2(13) defines a building loan contract as an agreement under which a lender agrees to make advances to an owner for an improvement of real property, secured by a mortgage on that property. A building loan mortgage, under § 2(14), is a mortgage made under that contract.
The label on the loan documents does not control. In Altshuler Shaham Provident Funds, Ltd. v GML Tower, LLC, 21 NY3d 352 (2013), a $10 million loan that set aside $4.5 million in a restricted account to be released for improvements to a building was held to be a building loan contract. The lender never filed it or its later amendments.
If any part of a mortgage loan is earmarked to pay for an improvement and advanced over time, treat that part as a building loan.
Lender checklist
| Step | Requirement | Source |
|---|---|---|
| Written contract | In writing, acknowledged | Lien Law § 22 |
| Borrower’s sworn statement | In the contract | Lien Law § 22 |
| Trust fund covenant | In mortgage or contract | Lien Law § 13(3) |
| File original | On or before mortgage recording | Lien Law § 22 |
| Filing office | County clerk, not register | Lien Law § 22 |
| Filing fee | $25; $50 in NYC | Lien Law § 22 |
| File modifications | Within 10 days of signing | Lien Law § 22 |
1. Put the contract in writing and have it acknowledged
Section 22 requires the building loan contract, and any modification, to be in writing and duly acknowledged. 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, verified by the borrower, showing:
- the consideration paid or to be paid for the loan;
- all other expenses incurred or to be incurred in connection with the loan; and
- the net sum available to the borrower for the improvement.
The statute requires only the borrower’s verification. The lender does not swear to it.
The net sum is the number contractors and suppliers rely on. The Court of Appeals in Altshuler described the purpose of § 22 as letting contractors learn exactly what sum the loan actually made available for the project. An inflated net sum, or one that hides fees and reserves, undercuts that purpose.
Budget lines 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, and recommends placing uncertain items in the project loan rather than the building loan. That is a structuring practice, not a statutory requirement.
3. Include the trust fund covenant
Lien Law § 13(3) requires a building loan mortgage to contain the borrower’s covenant to hold advances as a trust fund to be applied first to pay the cost of improvement. A statement that the mortgage is “subject to the trust fund provisions of section thirteen of the lien law” satisfies it. If the party signing the building loan contract is not the fee owner, the covenant goes in the contract, which must then be executed and filed under § 22.
The covenant and the § 22 filing work together. Under Lien Law § 13(2), advances made before a mechanic’s lien is filed keep priority over that lien only if the mortgage or contract has the covenant and the contract was filed as § 22 requires. Advances made after a notice of lien is filed are subordinate to 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: the contract must be filed on or before the date the building loan mortgage is recorded. Some underwriter manuals describe a ten-day window after closing for the original contract; the statute does not say that, and the ten-day period in § 22 applies to modifications. 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
The contract is filed with the clerk of the county where any part of the land is located. Section 22 states that a building loan contract or modification 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, but the building loan contract goes 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 modification within ten days
Any modification must be in writing, acknowledged and filed within ten days after it is signed. Common triggers are loan increases, budget reallocations, and changes to fees or reserves that move the net sum available.
Two cautions:
- Contractors may already have relied on the filed net sum. White and Williams advises against post-closing amendments that reduce the net sum stated in the original affidavit, and recommends an updated affidavit with each modification filing.
- Section 22 states that an assignment of loan moneys, and certain bond-and-mortgage arrangements under Lien Law § 26, are not treated as modifications or new building loan contracts.
In Altshuler, the lender’s failure to file a March 2008 amendment was a separate § 22 violation, alongside the unfiled original agreement.
What happens if the filing is missed
Section 22 states that if the contract is not filed, the interest of each party to it in the real property is subject to the lien and claim of anyone who later files a notice of mechanic’s lien.
How much of the mortgage that reaches was settled by the Court of Appeals in Altshuler. The trial court had subordinated the entire mortgage (28 Misc 3d 475, 2010). The Court of Appeals limited the penalty to the construction funds: the $5.5 million portion used to pay off the existing purchase-money mortgage, which closed before any construction money was advanced and was recorded before any contractor began work, kept its priority. A dissent would have subordinated the whole loan.
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 § 13(2) protection for pre-lien advances would otherwise cover;
- the lender’s foreclosure recovery on those advances comes after lienors are paid; and
- underwriters condition insurance of the building loan mortgage’s priority on timely filing, so the loan policy may except those liens.
Mechanic’s liens are filed with the county clerk and can be filed up to eight months after the last work, or four months for a single-family dwelling (Lien Law § 10). 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 the recorded mortgage with the § 13 trust covenant and proof that the building loan contract was filed with the county clerk on time. Stewart’s New York underwriting 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 title is continued to each disbursement date to pick up intervening mechanic’s liens. TIRSA publishes a Construction Loan Policy Endorsement that amends the date of policy based on a continuation search. Requirements are underwriter-specific, 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 a continuation search before an advance, stop and assess it before funding. White and Williams notes that later liens can relate back to the first one filed.
Related filings that are not the same thing
Notice of lending. Lien Law § 73 lets a lender file a notice of lending with the county clerk. It protects the lender against claims that repayments it received were diverted trust funds under Article 3-A. It does not replace the § 22 filing, and practitioners disagree on how much protection it adds.
Trust fund status of the loan proceeds. Under Lien Law § 70, funds received by the owner under a building loan contract or building loan mortgage are trust assets, and the owner is the trustee. Diversion is the borrower’s exposure, 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.
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