A construction lien is a security interest in the property on which construction work was completed. Construction liens that are properly filed and served remain with the property no matter who may own the property in the future. The main purpose of construction liens is to prevent the owner of the property from transferring the property or using it to borrow more money before they resolve the claim on the lien.
The value of the property then becomes the source of payment for the people who supplied materials, labor, and other services used to improve the land. Ultimately, the property may be sold to pay the claimant on the lien in a foreclosure action. The construction lien is a powerful tool, but it is not absolute.
Does a Construction Lien Prevent a Lawsuit?
The construction lien law in New Jersey does not affect any rights of the other parties. As such, if a contractor, subcontractor, designer, or other supplier places a lien on a property, they can still file a lawsuit against the property owner for breach of contract. In fact, the damages available in a breach of contract lawsuit may greatly exceed the amount subject to construction liens because these lawsuits do not have the same type of restrictions placed on them.
The Three Tiers in Construction Liens
Any person or agency can file and serve a construction lien as long as they are in the first three contractual tiers and have provided work, material, services, or equipment to the other party. The main contractor or construction manager is the first tier of the relationship between suppliers and the property owner. Architects, surveyors, and engineers are also in the first contractual tier.
The second tier is the subcontractor or supplier that had a relationship with the property owner, architect, or engineer. Subcontractors and suppliers who have contracts with the subcontractors are also in the third tier.
Suppliers that have business with other suppliers related to the property are not entitled to file construction liens. Any person who performs work that requires a license, but they do not hold such a license, are also not allowed to file construction liens.
Construction Liens Require a Written Contract
In New Jersey, it is the law that all construction liens must be based upon a written contract. When a supplier is providing equipment or material, there must be a contract between. The supplier and the owner, or another party that ordered the supplies, or an order slip or delivery slip. Both of these must be signed by the party to whom the supplier provided equipment or material.
Under the construction lien law, all written contracts must also include a price for the project. However, a contract can include cost plus pricing or unit pricing if the prices are certain. Regardless of whether a definitive price is included, a person must be able to calculate the cost of the project from the terms of the contract.
Time Limit for Filing a Construction Lien
In order to be valid, liens must be filed with the clerk of the county in which the construction project is located within a certain period of time. The time limit on commercial projects is 90 days from the time work was last performed on the project or supplies were furnished. The parties cannot agree on their own to extend this time limit.
Liens on residential and mixed use projects must be filed within 120 days from the last date work was performed or supplies were furnished. When the construction project is residential in nature, the claimant must file a notice of unpaid balance within 60 days of the last day work was performed. The entire process must still be completed within the 120 day time limit on these liens. These rules apply to planned unit developments and condominium projects.
If the property is going to be the subject of a lawsuit, the suit must be filed within one year of the date work was last performed or supplies were provided. Owners of the property can force the claimant to take the matter to court by demanding that an action start within 30 days.
Our Construction Lien Lawyers in New Jersey Can Advise on Your Claim
If you need to get a construction lien discharged, or placed on a property you provided work for, our New Jersey construction lien lawyers at Snellings Law can help. Call us today at 973-265-6100 or contact us online to schedule a consultation and obtain the sound legal advice you need.