For most nonresidential construction subcontractors, the risk of non-payment on a job is a threat that, if realized, can cease the day-to-day operations of the business. Non-payment usually stems from a dispute between the general contractor and the subcontractor regarding the quality of the work. If you are a subcontractor, this article will explain your rights to lien property in efforts to ensure compensation for the work you have performed. Please note, the contents of this article only apply to liens involving non-residential construction contracts.
Your Entitlement to a Lien
Any contractor, subcontractor or supplier who provides work, services, material or equipment pursuant to a contract, shall be entitled to a lien for the value of the work or services performed, or materials or equipment furnished in accordance with the contract and based upon the contract price. N.J.S.A. 2A:44-3. Such liens attach to the interest of owner of the property. Once the lien is filed and attached to the property, the owner and the general contractor may be forced to pay the debt or contest the lien through costly litigation.
The key to the lien process is the existence of a contract to provide work, services, material or equipment. For subcontractor purposes, it is irrelevant that the contract is with the general contractor and does not include the property owner directly. This means the subcontractor still has lien rights against the property despite not having a direct contractual relationship with the property owner.
Filing a Lien Claim
To record a lien, you must file a lien claim form in the County where the property is located. For ease of use, the suggested format and contents of a lien claim form are provided within N.J.S.A. 2A:44A-8. A subcontractor should insert the specific information relevant to his/her claim into the designated areas provided by N.J.S.A. 2A:44A-8, then sign, notarize, and send the lien claim form for filing along with the appropriate recording fee. Once recorded by the appropriate County, a copy of your lien claim form will be returned bearing a time stamp and recording information. This time stamped copy must then be sent by simultaneous certified and regular mail to the property owner, general contractor, and/or any subcontractor against who the lien is asserted.
In New Jersey, the lien claim form MUST be recorded within 90 days of the date of “last work.” The date of “last work” is the last day that you provided work, services, materials or equipment for which you expected to be paid. N.J.S.A. 2A:44A-6(2).
After the Lien Claim is Filed
Once the lien claim is filed and notice provided, the property owner may legally withhold or deduct the amount claimed from the unpaid part of the contract price payable to the general contractor and pay that amount to the claimant unless the general contractor provides the owner with written notice that claimant is not owed the monies and the reasons why. N.J.S.A. 2A:44A-12. This is to the benefit of a subcontractor who has been refused payment by a general contractor because it gives the property owner the ability to pay the debt directly to the subcontractor and satisfy the lien.
If the property owner refuses to pay the lien amount or the general contractor objects, the subcontractor has one year from the date of “last work” to file an action in a court to enforce the lien. The general contractor may accelerate this process by sending the subcontractor a notice requiring the claiming subcontractor to commence an action to enforce the lien. In that case, the action must be commenced within 30 days of receiving the notice requiring commencement.
A non-residential construction subcontractor has lien rights against the property on which he works. Often times, it is a dispute with the general contractor, not the property owner that leads to the subcontractor not being paid. New Jersey’s Construction Lien Laws provide the subcontractor with remedies in these situations which can facilitate payment directly from the property owner.
If you are a contractor and have questions regarding your lien rights, please contact a Business Law Attorney at our offices for a consultation.