For most commercial construction contractors and subcontractors, non-payment on a job can cripple business. Non-payment usually stems from a dispute between the general contractor (GC) and the subcontractor regarding the quality of the work. Sometimes, the GC refuses to pay the subcontractor despite still being paid by the property owner. Whether the GC actually believes the work is substandard or is just trying to increase his or her profits, you can use the law to put the world on notice that you haven’t been paid through the filing of a lien. If you are a subcontractor, this article details how to lien property and force compensation for the work performed. Please note, the contents of this article only apply to liens involving non-residential construction contracts.
Your entitlement to a lien
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. Such liens attach to the interest of owner of the property. Once the lien is filed, the owner and the GC must pay the debt or contest the lien through costly litigation.
To obtain a valid lien, there must be a written contract to provide work, services, material or equipment. For subcontractor purposes, it is irrelevant that the contract is with the GC and not the property owner. In other words, a subcontractor can still lien the property despite not having a direct contractual relationship with the property owner.
Filing the lien
To record the lien, you must file a lien claim form in the County where the property is located. For ease of use, lien claim forms are provided within N.J.S.A. 2A:44A-8. An experienced attorney should be retained to advise and assist with filing and service of the lien claim. The attorney will insert the specific information relevant to the claim into the designated areas provided by N.J.S.A. 2A:44A-8, then sign, notarize, and send the lien claim form for filing along with the appropriate recording fee. Once recorded in the County, a copy of your lien claim form will be returned bearing a time stamp and recording information. The time stamped copy must then be sent by certified and regular mail to the property owner, GC, and/or any subcontractor against who the lien is asserted.
In New Jersey, the lien claim form MUST be recorded within 90 days of the date of “last work.” The date of “last work” is the last day that you provided work, services, materials or equipment for which you expected to be paid. N.J.S.A. 2A:44A-6(2). Failure to exercise your lien rights within the 90-day period can result in a waiver.
After the lien is filed
Once the lien is filed and served, the property owner can legally withhold the amount claimed from any amounts owed to the GC and pay that amount to you instead unless the GC provides the owner with written notice contesting the amount you claim is owed and the reasons why. N.J.S.A. 2A:44A-12. This is to your benefit because it allows the GC to be bypassed in the payment process. Hence, the owner, not wanting a lien against the property, may pay you directly in satisfaction of lien and deal with the GC separately.
If the property owner refuses to pay or the GC objects, you have one year from the date of “last work” to file a lawsuit to enforce the lien. The GC may accelerate the process by sending you a notice requiring commencement a lawsuit to enforce the lien. In that case, you have 30 days to file suit.
The benefit of the lien is that it clouds title for the owner making it difficult to sell the property or obtain financing. Only when the lien is paid off, expunged or expires will that cloud on title be removed. So, the lien will incentivize the owner to pay you directly or force the GC to resolve the dispute. Negotiations with the GC typically follow in efforts to reach an amicable solution. Strong representation is critical at this juncture because detailed knowledge of lien law can provide leverage. If the parties can agree on settlement, the agreed upon amount will be paid to you and, in return, you will release the lien against the property. If settlement cannot be reached, you maintain the option to file a lawsuit for the amount claimed in the lien plus attorneys’ fees.
NJ Construction Lien Laws Can Get You Paid
In the commercial construction business jobs rarely stay on schedule or go according to plan. Defects or delays can reduce the contract price. The GC may look to offset those losses by passing them along to the subcontractors regardless of who was at fault. Subcontractors simply cannot absorb such losses. However, as a commercial construction contractor, you have lien rights against the properties you work on. If a dispute originating with the GC or the property owner leaves you unpaid or underpaid for work performed, New Jersey’s Construction Lien Laws can get you paid. This is a highly technical area of law that requires attention to dates and details. The attorneys at Scura Wigfield Heyer Stevens & Cammarota have the knowledge and experience successfully handle your lien claims.
If you are a contractor and have questions regarding your lien rights, please contact our offices for a consultation.