N.Y. Lien Law § 71: Purpose of the trust; "trust claims"; "beneficiaries

§ 71. Purpose of the trust; "trust claims"; "beneficiaries." 1. The

trust assets of which an owner is trustee under subdivisions five (a) to

five (f), inclusive, of section seventy of this chapter shall be held

and applied for payment of the cost of improvement. The trust assets of

which an owner is trustee under subdivision five (g) of section seventy

of this chapter shall be held and applied for payment of the cost of

improvement and, in addition, for the purposes of the further trust

provided in section seventy-one-a of this chapter.

2. The trust assets of which a contractor or subcontractor is trustee

shall be held and applied for the following expenditures arising out of

the improvement of real property, including home improvement or public

improvement and incurred in the performance of his contract or

subcontract, as the case may be:

(a) payment of claims of subcontractors, architects, engineers,

surveyors, laborers and materialmen;

(b) payment of the amount of taxes based on payrolls including such

persons and withheld or required to be withheld and taxes based on the

purchase price or value of materials or equipment required to be

installed or furnished in connection with the performance of the

improvement;

(c) payment of taxes and unemployment insurance and other

contributions due by reason of the employment out of which such claims

arose;

(d) payment of any benefits or wage supplements, or the amounts

necessary to provide such benefits or furnish such supplements, to the

extent that the trustee, as employer, is obligated to pay or provide

such benefits or furnish such supplements by any agreement to which he

is a party;

(e) payment of premiums on a surety bond or bonds filed and premiums

on insurance accrued during the making of the improvement, including

home improvement, or public improvement;

(f) payment to which the owner is entitled pursuant to the provisions

of section seventy-one-a of this chapter.

3. (a) With respect to the trust of which an owner is trustee, "trust

claims" means claims of contractors, subcontractors, architects,

engineers, surveyors, laborers and materialmen arising out of the

improvement, for which the owner is obligated, and also means any

obligation of the owner incurred in connection with the improvement for

a payment or expenditure defined as cost of improvement.

(b) With respect to the trusts of which a contractor or subcontractor

is trustee, "trust claims" means claims arising at any time for payments

for which the trustee is authorized to use trust funds as provided in

subdivision two of this section.

(c) No claim acquired by the trustee by assignment or otherwise shall

be a trust claim after it has been so acquired.

4. Persons having claims for payment of amounts for which the trustee

is authorized to use trust assets as provided in this section are

beneficiaries of the trust whether or not they have filed or had the

right to file a notice of lien as provided in article two of this

chapter or shall have recovered a judgment therefor. Where an owner

becomes obligated to incur an expenditure as part of the cost of

improvement, any person to whom he is so obligated is a beneficiary.

5. For the purposes of this article, every trust claim shall be deemed

to be in existence from the time of the making of the contract or the

occurrence of the transaction out of which the claim arises and, except

as provided in section seventy-six and section seventy-seven, the rights

of each member of the class of beneficiaries accrue at the making of the

contract or the occurrence of the transaction out of which the claim

arises.