If you are a property owner who has had a construction lien filed against your property, you may have defenses allowing you to discharge the lien at the lien claimant’s expense. Liens against property are problematic because they can prevent transfers of the property or impede your ability to obtain a mortgage. This article will explore some of the defenses available in the event a construction lien has been claimed against your property.
Timing is Everything
Any contractor, subcontractor or supplier who provides work, services, material or equipment pursuant to a contract, shall be entitled to a lien for the value of the work or services performed, or materials or equipment furnished in accordance with the contract and based upon the contract price. N.J.S.A. 2A:44-3. The process by which and time periods within which a construction lien claim may be filed depends upon whether the property being improved was commercial or residential.
Commercial construction lien claims must be recorded within 90 days of the date of “last work.” The date of “last work” is the last day that the contractor provided work, services, materials or equipment for which they expected to be paid. N.J.S.A. 2A:44A-6(2). Residential construction lien claims must be recorded within 120 days of the date of last work. Additionally, in the residential construction context, prior to filing the construction lien claim, the contractor must file a Notice of Unpaid Balance and Right to File Lien (the “NUB”) and go through the American Arbitration Association’s arbitration process. The NUB must be filed within 60 days of the date of last work. Any violations of these prescribed time periods may serve to forfeit the lien.
Forfeiting a Valid Construction Lien
Once a valid construction lien is filed, whether commercial or residential, the lien claimant has one year from the date of last work to commence an action to enforce the lien. N.J.S.A. 2A:44-14(a)(1). If the lien claimant fails to commence the action within the one year period, the lien is forfeited. Id. Additionally, at any time after a valid lien claim is filed, a property owner may serve the lien claimant with a written demand to enforce the lien. The lien claimant then has 30 days from receipt of the demand to commence an action to enforce the lien or forfeit the lien. N.J.S.A. 2A:44A-14(a)(2).
Should the lien be forfeited for any of the reasons named above, the owner may demand that the lien claimant formally discharge the lien, within seven days, through the filing of a certificate of discharge. N.J.S.A. 2A:44A-30(a). If the lien claimant refuses or otherwise fails to file the certificate of discharge within the seven day period, the owner may proceed in a summary manner, via the filing of an order to show cause complaint, to cause discharge the lien. N.J.S.A. 2A:44A-30(b). The owner is entitled to hold the lien claimant liable for his or her court costs, and reasonable legal expenses, including, but not limited to, attorneys’ fees incurred in having to cause the discharge of the forfeited lien. N.J.S.A. 2A:44A-14(b).
Commercial and residential property owners often undertake construction or improvements upon their property. In the event of a payment dispute, a construction lien may be filed by one or more of the contractors. However, the property owner may have defenses to these lien claims which, if successful, can be pursued at no cost to the owner. At Scura, Wigfield, Heyer, Stevens & Cammarota LLP, we are experienced in the filing and defending against both residential and commercial construction liens.
If you are a property owner who has questions regarding a construction lien filed against your property, please contact our offices for a consultation.