Construction liens, or mechanics liens, are age-old tools used by contractors and subcontracts alike as a means to secure payment for labor performed or materials furnished. Factors that make construction liens more attractive than litigation include the cost and time involved, the fact that the lien attaches to the interest of the owner of the property, and the priority afforded to properly filed construction liens over prior mortgages or other encumbrances.
Depending on the nature of the project, a contractor in New Jersey may make a claim or claims under the Construction Lien Law, the Municipal Mechanic’s Lien Act or the Public Works Bond Act. This article will focus on the procedure for filing a claim under the Construction Lien Law, and in particular, when the project is one for construction or improvements under a residential construction contract. These scenarios present unique challenges as the notice and filing requirements must be strictly followed in order to establish a valid claim.
In January 2011, the Construction Lien Law was revised and the requirements pertaining to a claim based upon a residential construction contract were modified. Essentially, a claimant has 120 days to perfect a residential construction lien following the date the last work, services, material or equipment was provided for which payment is claimed. In order to perfect the claim, however, a series of steps must be followed. First, a claimant is required to file a Notice of Unpaid Balance and Right to File Lien (NUB) within 60 days from the date the claimant last performed work or supplied materials. Within 10 days of filing the NUB, the claimant must serve a demand for arbitration to determine the validity and amount of the lien claim in accordance with the American Arbitration Association.
Within 10 days of receiving the arbitrator’s decision, which must be rendered no later than 30 days following the receipt of the demand for arbitration, the claimant must record the lien claim. The key is that all this must occur within the 120-day timeframe following the date that work was last performed or materials were provided. If a valid lien is not satisfied, the claimant must file suit in the Superior Court to enforce the lien within one year of the date of the last provision of work or materials or the claim will be forfeited.
As one can see, failure to adhere to the prerequisites of the lien law pertaining to residential jobs can be fatal, effectively eliminating this method of collection which is often preferable to litigation given the respective costs in both money and time. So, the moral is, if you are owed money on a residential job, do not delay!