13. Priority of liens. (1) A lien for materials furnished or labor
performed in the improvement of real property shall have priority over a
conveyance, mortgage, judgment or other claim against such property not
recorded, docketed or filed at the time of the filing of the notice of
such lien, except as hereinafter in this chapter provided; over advances
made upon any mortgage or other encumbrance thereon after such filing,
except as hereinafter in this article provided; and over the claim of a
creditor who has not furnished materials or performed labor upon such
property, if such property has been assigned by the owner by a general
assignment for the benefit of creditors, within thirty days before the
filing of either of such notices; and also over an attachment hereafter
issued or a money judgment hereafter recovered upon a claim, which, in
whole or in part, was not for materials furnished, labor performed or
moneys advanced for the improvement of such real property; and over any
claim or lien acquired in any proceedings upon such judgment. Such liens
shall also have priority over advances made upon a contract by an owner
for an improvement of real property which contains an option to the
contractor, his successor or assigns to purchase the property, if such
advances were made after the time when the labor began or the first item
of material was furnished, as stated in the notice of lien. If several
buildings are demolished, erected, altered or repaired, or several
pieces or parcels of real property are improved, under one contract, and
there are conflicting liens thereon, each lienor shall have priority
upon the particular part of the real property or upon the particular
building or premises where his labor is performed or his materials are
used. Persons shall have no priority on account of the time of filing
their respective notices of liens, but all liens shall be on a parity
except as hereinafter in section fifty-six of this chapter provided; and
except that in all cases laborers for daily or weekly wages shall have
preference over all other claimants under this article.

(1-a) Parties having assignments of moneys due or to become due under
a contract for the improvement of real property, unless such assignments
be set aside as diversions of trust assets as provided in article
three-a of this chapter, shall have priority as follows:

An assignee of moneys or any part thereof, due or to become due under
a contract for the improvement of real property, whose assignment is
duly filed prior to the filing of a notice of lien or assignment of
every other party to the action, shall have priority over those parties
to the extent of moneys advanced upon such assignment before the filing
of the notice of lien or assignment next subsequent to his assignment,
but as to moneys advanced subsequent to a notice of lien or assignment
filed and unsatisfied or not discharged such assignee for the purpose of
determining his proportionate share of moneys available for distribution
as provided in subdivision one of this section shall be treated as a
lienor having a lien to the extent of moneys so advanced.

An assignee of moneys or any part thereof, due or to become due under
a contract for an improvement of real property whose assignment is duly
filed subsequent to the filing of the notice of lien or assignment of
any other party shall for the purpose of determining his proportionate
share of moneys available for distribution, as provided in subdivision
one of this section be treated as a lienor having a lien to the extent
of moneys actually advanced upon such assignment prior to the filing
thereof.

(2) When a building loan mortgage is delivered and recorded a lien
shall have priority over advances made on the building loan mortgage
after the filing of the notice of lien; but such building loan mortgage,
whenever recorded, to the extent of advances made before the filing of
such notice of lien, shall have priority over the lien, provided it or
the building loan contract contains the covenant required by subdivision
three hereof, and provided the building loan contract is filed as
required by section twenty-two of this chapter. Every mortgage recorded
subsequent to the commencement of the improvement and before the
expiration of the period specified in section ten of this chapter for
filing of notice of lien after the completion of the improvement shall,
to the extent of advances made before the filing of a notice of lien,
have priority over liens thereafter filed if it contains the covenant
required by subdivision three hereof. The lien of a vendee under an
executory contract for the sale of land and the improvement thereof by
the construction of a building thereon shall, to the extent of amounts
paid thereunder to the vendor before the filing of a notice of lien,
have priority over liens filed after the contract or memorandum thereof
is recorded as provided in section two hundred ninety-four of the real
property law if the recorded contract or memorandum specifies the total
amount of payments made by the vendee or required by the contract to be
made by the vendee before conveyance of title.

(3) Every such building loan mortgage and every mortgage recorded
subsequent to the commencement of the improvement and before the
expiration of the period specified in section ten of this chapter for
filing of notice of lien after the completion of the improvement shall
contain a covenant by the mortgagor that he will receive the advances
secured thereby and will hold the right to receive such advances as a
trust fund to be applied first for the purpose of paying the cost of
improvement, and that he will apply the same first to the payment of the
cost of improvement before using any part of the total of the same for
any other purpose, provided, however, that if the party executing the
building loan contract is not the owner of the fee but is the party to
whom such advances are to be made, a building loan contract executed and
filed pursuant to section twenty-two of this chapter shall contain the
said covenant by such party executing such building loan contract, in
place of the covenant by the mortgagor in the building loan mortgage as
hereinbefore provided. Nothing in this subdivision shall be considered
as imposing upon the lender any obligation to see to the proper
application of such advances by the owner; and nothing in this section,
nor in that portion of section two of this chapter, defining "cost of
improvement" shall be deemed to impair or subordinate the lien of any
mortgage containing the covenant required by this subdivision. To the
extent that the trust res consists of the right to receive advances as
distinct from advances actually received, breach of the trust shall give
rise to a civil action only. The covenant provided for herein shall be
deemed to have been made and to be in full force and effect if, in lieu
of the foregoing provisions, a statement in substantially the following
form is contained in the mortgage or contract, "subject to the trust
fund provisions of section thirteen of the lien law."

(4) Nothing in subdivision two or three of this section shall apply to
any mortgage given by a purchaser for value from an owner making the
improvement and recorded prior to the filing of a lien pursuant to this
chapter, provided the instrument of conveyance contains the provisions
mentioned in subdivision five herein.

(5) No instrument of conveyance recorded subsequent to the
commencement of the improvement, and before the expiration of the period
specified in section ten of this chapter for filing of notice of lien
after the completion of the improvement, shall be valid as against liens
filed within a corresponding period of time measured from the recording
of such conveyance, unless the instrument contains a covenant by the
grantor that he will receive the consideration for such conveyance and
will hold the right to receive such consideration as a trust fund to be
applied first for the purpose of paying the cost of the improvement and
that he will apply the same first to the payment of the cost of the
improvement before using any part of the total of the same for any other
purpose. Nothing in this subdivision shall be construed as imposing upon
the grantee any obligation to see to the proper application of such
consideration by the grantor. Nothing in this subdivision shall apply to
a deed given by a referee or other person appointed by the court for the
sole purpose of selling real property. Nothing in this subdivision shall
apply to the consideration received by a grantor who, pursuant to a
written agreement entered into and duly recorded prior to the
commencement of the improvement, conveys to the person making such
improvement, the land upon which such improvement is made. However, such
a conveyance shall be subject to liens filed prior thereto, as provided
by this chapter. To the extent that the trust res consists of the right
to receive the consideration for such conveyance as distinct from the
consideration actually received, breach of the trust shall give rise to
a civil action only. The covenant provided for herein shall be deemed to
have been made and to be in full force and effect if, in lieu of the
foregoing provisions, a statement in substantially the following form is
contained in the instrument of conveyance, "subject to the trust fund
provisions of section thirteen of the lien law."

Except that this section shall not apply to any mortgage taken by the
home owners' loan corporation, a corporation created under an act of
congress, known as the "home owners' loan act of nineteen hundred
thirty-three," and the "home owners' loan act of nineteen hundred
thirty-three as amended," and said mortgage shall have priority over any
and all liens filed subsequent to the date of the recording of said
mortgage whether or not the cash and/or bonds for which said mortgage
has been taken as security, shall have been advanced at the time of the
execution of such mortgage or subsequent thereto, and it shall not be
necessary to execute and file any building loan contract or any other
contract, in compliance with this section or any part thereof.

(6) Every assignment of moneys, or any part thereof, due or to become
due under a contract for the improvement of real property shall contain
a covenant by the assignor that he will receive any moneys advanced
thereunder by the assignee and will hold the right to receive such
moneys as trust funds to be first applied to the payment of trust claims
as defined in section seventy-one of the lien law, and that he will
apply the same to such payments only, before using any part of the
moneys for any other purpose.