Filing a Construction Lien to Collect Payment
Whenever a construction business enters into an agreement with contractors or subcontractors, it is essential to have a written contract in place. Once you have a written contract, you can file a construction lien in order to recover payment for any work that has been completed on a project but remains unpaid.
Filing New Jersey construction liens
A NJ construction lien is an effective collection tool for parties involved in the construction business or the improvement of real property to compel payment for work they have completed. You can only file construction liens when you have a written contract. In fact, liens for amounts due on change orders may be filed only if the change order was in writing. This type of lien is recorded against the subject real estate, and the owner cannot sell or refinance the property without first paying the debt secured by the lien. Thus, a mechanic’s lien can result in the lien claimant receiving payment out of the proceeds from the sale of the property. Filing a contractor’s lien can be a complex and technical process in New Jersey and our Parsippany construction lien attorney can best assist you with this process.
Who is entitled to file a NJ construction lien?
Many construction industry businesses can file construction liens, including general contractors, subcontractors, construction managers, suppliers of building materials, architects, engineers and land surveyors. A broad range of work can form the basis of a construction lien, including:
- Design work
- Excavation or dirt work
- Building additions
- Repairs and renovations
- Electrical work
- Heating, ventilating and air-conditioning (HVAC) work
Having a New Jersey construction lien attorney file for you is an effective means of debt collection. If you have performed the work required under your contract and you have not received payment, we at Snellings Law LLC are prepared to discuss filing a lien with you. It is important to act quickly, however. This is because you must file the lien within 90 days from the last work performed or supplies provided, and served on the owner immediately thereafter. You must file a lawsuit within one year.
Work entitled to create liensAlmost any service provider is entitled to place a lien on property that they have worked on. The main condition is that they have not been paid for work done according to the contract. Service providers are, therefore, barred from placing liens against work they have not yet completed. Also, liens cannot be placed for work that has been agreed to and later rescinded violating the terms of a contract. Lost profits are not eligible for a lien. Delay damages are not eligible for a lien. Liens are authorized only when there is completed work that has not yet been paid.
Additionally, there are some types of work or materials that are not authorized for a lien. These include:
- Equipment or materials purchased for general purpose or multiple projects
- Costs of material secured by documentation (when a UCC-1 can be filed, the seller is not entitled to place a lien on construction)
- Feasibility studies or evaluation work does not qualify a stakeholder to place a lien on property
- Personal property that is not “part” of the real estate
Additionally, liens cannot be placed on public works. If an invalid lien has been placed on your property, a construction lien lawyer can help you discharge the lien and recover damages.
Restrictions on lien amounts
Liens are authorized only in the amount of payment guaranteed by contract minus the amount that has already been paid. This rule applies not only to contractors but subcontractors as well. Without this rule, the possibility arises that a property owner would have to pay twice for the same work. A primary contractor who cannot pay a subcontractor due to a failure of the property owner to timely pay for services rendered must deduct the amount owed to the contractor or purchase their share of the lien. A construction lien lawyer can help you understand your liabilities and entitlements under the law.
Time limits for filing and foreclosing on lien claims
A contractor or materials supplier who wishes to file a lien against a property must do so within 90 days of the lien claimant’s last work. The lien must be filed with the clerk of the county or counties in which the project is located. The court will not extend the statute of limitations in cases where work has been provided after completion or termination of the contract. Neither can the lien be extended by contract or the agreement of both parties.
Residential contractors must file a notice of unpaid balance within 60 days of the last work completed and an attempt at arbitration must be made before a lien can be filed. The process must be completed within 120 days. This requirement applies to mixed residential and commercial projects as well.
A lawsuit to foreclose a lien must be initiated within a year of the last date of work provided. Owners can force a claimant into court by written demand. This compels all action to be started within 30 days. If the claimant does not initiate the lawsuit within 30 days, they will forfeit their right to file the lien.
Penalties for filing an invalid lien
Those who file invalid liens against owners face stiff penalties. These include the payment of attorney’s fees, court costs, and any other financial harm that comes to the defendant. This includes:
- Filing a baseless lien
- Filing a lien for an exaggerated amount of money
- Failing to discharge a lien after the expiry of the lawsuit period
- Failing to discharge a lien after the amount has been paid (within 30 days)
- Serving a list that omits a verified claimant
If the lien is not discharged after the court has found it to be invalid or the amount has been paid to reconcile the outstanding debt within 30 days, the claimant will be held liable for court costs and legal fees related to the defense of the lien. Additionally, if the parties impacted by the lien can show harm caused by the failure to timely discharge the lien, the claimant will owe them damages. A construction lien lawyer can ensure you aren’t the victim of a baseless lien.
Challenging New Jersey construction liens
NJ construction liens have complicated requirements to be valid. If the lien claimant fails to comply with the requirements, the contractor may in some circumstances be liable to pay the owner’s attorney’s fees incurred in getting the lien discharged. Additionally, if you file a NJ construction lien for money found not to have been due, the lien claimant may be liable for the owner’s attorney’s fees spent in defending the claim and seeking to have the lien discharged. An owner can also have the lien discharged by posting a bond with the Superior Court of New Jersey while the case on the underlying debt is pending.
Schedule your initial consultation with a skilled New Jersey construction lien attorney
Snellings Law LLC protects your best interests and rights in prosecuting or defending construction liens. Contact us to schedule your appointment. Our office provides parking, access to public transportation and flexible hours by request.
Have a question? Get in touch with us. We would be glad to hear from you.
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