Suppliers and contractors file construction liens pursuant to the New Jersey Construction Lien Law in the hope that it will result in swift payment of their claims in full. Unfortunately, this is not always the result. Sometimes the construction lien is filed and there is no response from the owner or general contractor. Sometimes the construction lien is filed and its validity is immediately disputed. Sometimes the construction lien is filed and only partial payment of the claim is made. In short, a supplier or contractor may file a construction lien within the time allowed by the Construction Lien Law, but remain unpaid. When that occurs, New Jersey’s Construction Lien Law requires, a supplier, contractor or other lien claimant to take additional steps in order to preserve a construction lien claim.
A timely filed and valid construction lien will become invalid and cease to be enforceable if the lien claimant does not file suit before the deadlines set forth in the Construction Lien Law. In order to preserve the enforceability of a construction lien, a lawsuit must be filed either:
(1) Within one year of the date of the last provision of work, services, material or equipment, payment for which the lien claim was filed; or
(2) Within 30 days following receipt of written notice, by personal service or certified mail, return receipt requested, from the owner, community association, contractor, or subcontractor against whose account a lien claim is filed, requiring the claimant to commence an action to enforce the lien claim.
If a lien claimant fails to sue to enforce its construction lien claim by the applicable deadline, the construction lien will no longer be enforceable and the lien claim will be forfeited. After that, if the lien claimant does not file a discharge of the construction lien in accordance with the Construction Lien Law, it can become subject to liability for court costs, attorney’s fees and other damages caused by the claimant’s failure to discharge the lien. N.J.S.A. 2A:44A-14(b) and N.J.S.A. 2A:44A-30.
On the bright side, just because a construction lien claim has been forfeited does not mean that the lien claimant can no longer sue to collect what is owed to it for services performed or materials provided. A lawsuit can still be pursued on other legal grounds in relation to the unpaid work or materials provided that the time to assert other claims, like breach of contract and quasi-contract claims, have not passed.
Nonetheless, allowing a construction lien claim to become invalid and leaving oneself reliant solely on breach of contract and quasi-contract claims defeats the very purpose of the construction lien. By allowing a construction lien to expire, a contractor or supplier gives up the leverage gained as a result of the construction lien claim: the potential to obtain a judgment secured by the real estate against which the construction lien is filed. This potential, and its capacity to lawfully interfere with the owner of the property’s sale of the property or use of the property as collateral to obtain credit, is what makes the filing of a construction lien a relatively effective means for a contractor or supplier to receive payment of their claim in the first place.
For these reasons, if you have already gone through the trouble of timely filing a valid construction lien, and the amount of the construction lien is at all substantial, there are clear reasons to file a lawsuit before time runs out under New Jersey’s Construction Lien Law in order to preserve the construction lien claim. While there are certainly other considerations that go into deciding whether or not to file suit in this situation, preservation of the construction lien claim is an important one. At the end of the day, a subcontractor is looking for a way to get the owner or contractor to pay for work performed. Enforcing a construction lien by filing suit can be an effective way of doing just that if the mere filing of a construction lien has not resulted in payment. If you have filed a construction lien and have still not been paid, a construction attorney can help you determine whether it is advisable to file a lawsuit.
The construction lawyers of Law Office of Bart J. Klein devote a significant amount of their practice to New Jersey construction law and litigation, including construction liens. We welcome you to contact us for further information.
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