Whether it’s the kitchen makeover you’ve been wanting to do since purchasing a home or a large scale retail development, construction can be a stressful process for any property owner. One of the biggest challenges may be finding a general contractor and/or construction company that you trust; however, even if you do your due diligence things may still go wrong.
One of the most challenging perils facing property owners may be construction liens and claims. Construction liens are a powerful tool which can give contractors, subcontractors and suppliers a security interest in property and are made when improvements or materials have been supplied to a project but the party doing so has not been paid in part or fully. When a construction lien is placed on the subject property, the property owner may face a number of challenges: they may be in violation of certain terms of their mortgage and/or financing and they may not be able to sell or transfer any interest in the property. Moreover, an action may be filed in New Jersey’s Court system to foreclose upon the lien which could lead to greater exposure and have financial implications.
What Does New Jersey Law Say About Construction Liens?
The New Jersey Construction Lien statute, N.J.S.A. 2A:44A-1 et seq., provides varying procedures for the filing of a construction lien on a commercial or residential property. In either case, contractors, subcontractors and suppliers who provide work, services, material or equipment are entitled to file construction liens so long as certain conditions are met. First, the party filing the lien claim must have provided work, services, material or equipment under a signed contract. Second, the claimant must be either: a party who has a direct agreement/contract with the property owner such as a general contractor; a subcontractor or supplier to the general contractor; or subcontractors or suppliers having contracts with the above referenced subcontractors. It is important to note that suppliers to suppliers do not have the ability to file a construction lien claim.
How Does a Lien Apply to Residential Properties?
With regards to residential properties, a lien claimant must first file a Notice of Unpaid Balance and Right to File Lien Claim (the “Notice”) with the County Clerk. Copies of the Notice must be served on a number of parties depending upon who is filing the lien claim. After filing the Notice, the lien claimant must file also file a Demand for Arbitration with the American Arbitration Association. The arbitrator will hold a hearing and make a decision as to the validity of the lien. Following the arbitrator’s decision, the claimant must file the actual construction lien claim with the County Clerk no later than one hundred and twenty (120) days from the last performance of work or supply of materials. A lien filed after this specific time period may be determined to be void.
For commercial construction projects, a lien claim must be filed in the county where the project is located within ninety (90) days of the last date that services and/or material were provided to that project. The claimant then has ten (10) business days from filing the lien claim to serve a copy of such upon on the property owner and all parties against whom the claim is asserted. Following service of the lien claim, the claimant has either: thirty (30) days following written demand by the subject property owner to file an action regarding the lien or one year after the last day of work or provision of supplies to the project to file an action to establish the lien claim.
Challenge Your Construction Lien
If you are a commercial or residential property owner faced with a construction lien, contact the attorneys at Sandelands Eyet LLP to discuss ways to resolve the dispute. Our Partners have experience representing financial institutions in complex commercial, real estate and consumer litigation, title claims and disputes, contested foreclosure actions and appeals.
Call Sandelands Eyet LLP at (908) 470-1200 to discuss your construction lien issue.