If the owner of a private, non-residential construction project in New Jersey defaults on making payment to the supplier of labor and or materials, one of the most important things that supplier can do is to file a Construction Lien to protect its rights and monies.
For example, if a supplier enters into an agreement with a prime contractor or subcontractor to provide materials on a project and that prime contractor or subcontractor goes out of business or files for bankruptcy prior to making payments, the supplier would be left with no recourse against the prime contractor or subcontractor. To the extent that the supplier, however, has filed a Construction Lien against the property, it could still recover its payments directly from the Owner of the project. In order to do so, a subcontractor/supplier should be aware and mindful of certain timing and procedural requirements that must be followed to file a valid Construction Lien on private property in New Jersey.
As an initial matter, a Construction Lien can only be filed by the following class of claimants on a construction project:
- General Contractor
- First-Tier Subcontractor;
- Second-Tier Subcontractor;
- Supplier to Subcontractor or Prime Contractor;
Accordingly, a supplier to a supplier and suppliers to second-tier subcontractors do not possess any lien rights on private, non-residential construction projects in New Jersey.
Another requirement in order to file a construction lien is that the work was performed pursuant to a written contract/agreement. A common question posed by suppliers is whether a delivery slip or other document signed by the person to whom the materials or equipment is furnished suffices as a written document. Generally, such a document would satisfy the writing requirement. The New Jersey Construction Lien Law defines a “contract” as:
“Any agreement…in writing…signed by the party against whom the lien claim is asserted and evidencing the respective responsibilities of the contracting parties, including, but not limited to, price or other consideration to be paid, and a description of the benefit or improvement to the real property subject to a lien. In the case of a supplier, ‘contract’ shall include a delivery or order slip referring to the site or project to which materials have been delivered or where they were used and signed by the party against whom the lien claim is asserted…the phrase ‘party against whom the lien is asserted’ means the party in direct privity of contract with the party asserting the lien claim.”
Therefore, a supplier’s delivery ticket or order slip signed by the entity that hired the supplier which sets forth the responsibilities of the parties including the contract price and a description of services, should satisfy the writing requirement necessary in order to file a construction lien claim. Of course, a more detailed contract/agreement (rather than just a delivery ticket) would better protect a supplier’s right to file a lien claim.
In addition to the writing requirement, to protect a claimant’s lien right, the construction lien must be filed with the County Clerk where the project is located within 90 days of the supplier’s last date of work. It should be noted that warranty, repair/service calls and punch list work generally does not extend the 90-day deadline. The Construction Lien claim form requires certain information to be included, cannot be willfully overstated and requires proper service or else the claimant will forfeit its lien rights.
In addition to the writing requirement, to protect a claimant’s lien right, the construction lien must be filed with the County Clerk where the project is located within 90 days of the supplier’s last date of work. It should be noted that warranty, repair/service calls and punch list work generally does not extend the 90-day deadline. The Construction Lien claim form requires certain information to be included, cannot be willfully overstated and requires proper service or else the claimant will forfeit its lien rights.