Construction Lien Law Revisted

The New Jersey Construction Lien Law, which was amended in 1994, applies to any contractor, subcontractor or supplier, as defined by the Act, who provide work, services, equipment or materials pursuant to a contract. The contractor, subcontractor or supplier is entitled to a lien for those services, materials or equipment furnished. The lien attaches to the interest of the owner of the real property. However, if a tenant contracts for improvements to real property and the improvement has not been authorized in writing by the owner, the lien only attaches to the leasehold interest of the tenant.
One key difference between the “new” lien law and the prior Mechanics’ Lien Law is that there is no longer a need to file a Notice of Intention before the commencement of work. A lien may now be filed up to ninety days after the last day of work or the supplying of materials or equipment. The lien may only be filed for unpaid balances due under a written contract, signed by both parties. The requirement of a writing also applies to contract amendments or change orders.

A Claimant filing a lien claim can not sit back and do nothing while the lien encumbers the real property. Service of a copy of the filed lien claim must be made within ten days of filing. However, the period can be extended if it is not deemed prejudicial to the party served. An action to enforce the lien must be brought within one year of the date of the last provision of work, services, material or equipment, payment for which the lien claim was filed; or within thirty days following receipt of written notice from the owner that the claimant should commence an action. The failure to commence the action will result in a discharge of the lien and the payment of fees and expenses to the owner. The Act is not tolerant of improperly filed liens or liens which do not have a good faith basis. If a lien is not brought in good faith, the claimant may be liable for all court costs, reasonable expenses, including attorneys fees incurred in defending or causing the discharge of the lien claim. Prior to the hearing, the owner can obtain the discharge of the lien by filing a surety bond or depositing the funds or obtaining a court order. Following the hearing , and discharge by the Court, the county clerk must enter the discharge on the record. In the event of an appeal, the claimant must post a bond to protect the owner from possible damages caused by the continuation of the encumbrance.

The rules for the filing of a lien on residential construction contracts are more strict and include, among other things, the filing of a Notice of Unpaid Balance and Right to File Lien and mandatory arbitration.

Darrell M. Felsenstein is an Associate
at WJ&L, LLP who practices primarily in the
Litigation area.

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