Serve Your Mechanic’s Lien in Accordance with Statute

Always Serve Your Mechanic’s Lien in Accordance with Statute

Just as with notice requirements, lien statute varies by state, which means the required method(s) for service of the lien can vary. In The Critical Importance of Properly Serving a Construction Lien Claim, author Adam Sklar reviewed a recent New Jersey Court of Appeals decision, where the claimant’s lien was invalidated based on “defective service” of the lien.

Case Snapshot

The claimant was a subcontractor, hired by the general contractor, for the improvement to a condominium property. When the GC failed to pay the subcontractor, the subcontractor filed and served a construction lien.

What Was Defective?

As I read the case, I was confused; after all, it appeared the lien claimant followed statutory requirements, including serving the document via certified & first class mail. Where did the claimant go wrong?

According to Sklar’s review, the claimant mailed its lien to the street address of the project. Unfortunately, the project street address was not the “…last known business or residence of the owner or community association” as dictated by statute.

Here’s a quick look at statute:

N.J.S. 2A:44A-7 a. Serving of lien claim by claimant.

(1)   simultaneous registered or certified mail or commercial courier whose regular business is delivery service; and
(2)   ordinary mail addressed to the last known business or residence address of the owner or community association, contractor or subcontractor.  A lien claim served upon a community association need not be served upon individual “unit owners” as defined in section 3 of P.L.1993, c.318 (C.2A:44A-3).

Therefore, service of the lien was defective. Sklar also noted the court opinion didn’t rely solely on service to an incorrect address “…even if service had been made to the Association’s proper business address, the certified mailing of the lien had been returned unclaimed and the subcontractor had failed to present any evidence relating to the status of the ordinary mail.”

Can’t the Claimant Serve the Lien Again, if the Lien Was Recorded Timely?

New Jersey statute states the lien must be served upon all parties within 10 days from the filing of the lien. Sklar mentions the lienmay be served late, but that wouldn’t have changed the outcome. Why?  Because New Jersey is an unpaid balance lien state and the owner, not having been properly served with the lien, paid the GC in full, leaving no funds to lien.

Best Practice: Serve the Address on the Corporate Certificate

A best practice from Sklar? Serve the document upon the address listed on the entity’s corporate certificate.

“When filing a lien … a claimant must do a corporate search with the State to ensure it has the proper business address for that entity.  Of course, there may be other ways to determine the proper last known business address … but the corporation’s registered agent address, as filed with the State, should always be deemed a valid address for service of a lien.”

Did You Know?

NCS also follows this best practice & encourages our clients to serve the registered agent whenever possible.

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