New Jersey Residential Mechanic’s Lien Rights
What Could Go Wrong?
New Jersey residential and commercial projects are treated differently when securing mechanic’s lien rights. We’ve previously discussed key facts about New Jersey mechanic’s lien statute, however, today’s post is going to focus on residential projects.
The Steps for Securing Mechanic’s Lien Rights on New Jersey Residential Projects
In New Jersey, residential projects are defined as one- two- or three-family residences or a residential unit within a real property development, such as condominiums. If you are furnishing to a New Jersey residential project, you should file a Notice of Unpaid Balance and Right to File Lien within 60 days from your last furnishing.
This notice should include a demand for arbitration and be served within 10 days from the filing of the notice. You should serve the document upon the property owner or community association, the prime contractor and the subcontractor. The arbitrator then has 30 days from receipt of the demand, to decide whether arbitration is approved.
File the mechanic’s lien within 10 days from determination by the arbitrator that a valid lien shall attach to the improvement, and within 120 days from last furnishing materials or services. Also furnish any bond, letter of credit or funds required by the arbitrator.
Lastly, if you remain unpaid, file suit to enforce the lien within 1 year from last furnishing materials or services or within 30 days from receipt of a notice to commence suit.
Thank goodness for The National Lien Digest©!
Seems Straightforward, What Could Go Wrong?
I admit, I laughed as I typed “Seems Straightforward, What Could Go Wrong?,” because very little is straightforward in the world of mechanic’s liens. But hey, no one said mechanic’s liens can’t be entertaining!
Paul W. Norris recently wrote an article, Errors Made in Filing Residential Construction Liens, which highlights the primary mistake made by those furnishing to New Jersey residential projects:
“The most common mistake that contractors make with regard to residential construction liens is that they simply treat it as a commercial lien and never file a Notice of Unpaid Balance and Right to File a Lien.”
Unfortunately, neglecting to serve the notice isn’t the only mistake often made. Norris also mentions parties neglect to serve a demand for arbitration, or if the party remembers to serve the notice and the demand, they miss the lien deadline.
Missing deadlines and neglecting documents is obviously not a recommended practice with mechanic’s liens. New Jersey is not flexible with their requirements, and Norris points out the penalties that may be faced if an invalid lien is not removed:
“Under both the Commercial Lien Law, as well as the Lien Law governing residential properties, if a lien claim is not filed in accordance with the act it should be removed. Otherwise, the owner may be entitled to counsel fees, costs, and sanctions in obtaining the removal of the lien claim. I typically advise owners that if a lien claim is invalid they serve a Demand for Removal followed by a period of time to allow the contractor to remove the lien. If this is not successful, the homeowner can proceed with an action to remove the lien claim.”
Check out our newest flipbook to learn more about Notices of Commencement and their critical role in securing mechanic’s lien & bond claim rights!
NCS Webinars & Events
Here’s a glance at our upcoming webinars!
- UCC Filing in the Foodservice, Hospitality, and Beverage Industries (9/18 @ 1:00 pm)
- Understanding Lien Waivers (9/25 @ 1:00 pm)
- The Basics of the UCC Process (10/09 @ 1:00 pm)
- The Basics of the Lien and Bond Claim Process (10/23 @ 1:00 pm)
Check out our Events Page for more!