The First Step You Must Take to Protect Construction Lien Rights - Construction Lawyer
To File a Construction Lien, You Must Have a Signed Contract, Purchase Order or Delivery Ticket
With respect to material or equipment suppliers, signed delivery tickets or bills of lading will suffice to satisfy the contract requirement for a Construction Lien. Signed rental equipment agreements will also be sufficient. Obviously, material and equipment suppliers may also use subcontracts and purchase orders which are signed by a general contractor or subcontractor.
Risk of Overstating the Construction Lien Balance
It is important to note that including unsigned delivery tickets within a group of signed delivery tickets to support the dollar amount of the construction lien may present a risk of overstatement of the lien balance, in potential violation of N.J.S.A. 2A:44A-15. This issue often, and most quickly, arises when proceeding with respect to residential property, for which there is the additional requirement of the filing of a notice of unpaid balance ("NUB") and a demand for NUB arbitration, with a favorable award allowing the filing of the lien. The NUB is an additional requirement and prerequisite of filing the construction lien, all of which must be filed within 120 days of the last furnishing (as discussed below). The arbitrator of the claim of a material supplier claimant often will limit the amount of the lien to the total of the value of the invoices for which there are signed delivery tickets or bills of lading.
Notice of Unpaid Balance Arbitration
This issue is not often addressed in the commercial lien setting prior to the actual filing of the construction lien, but has significant potential peril with respect to every NUB and lien filed due to the significant penalties of allowing attorneys' fees and disbursements for wrongful filings such as overstated construction liens. Accordingly, evaluation of the signed documentary support for a potential construction lien is critical prior to the filing of the lien. As with any other usage of the Construction Lien law, if you make an error, you may be compelled to pay someone else's expenses. These complexities are one reason it can be beneficial to have a construction lawyer assist you in protecting or enforcing your lien rights.
A major gray area is whether a supplier can file a construction lien for materials which are delivered to a project for incorporation, but for one reason or another are not incorporated into the project. Under the case law interpreting the former Mechanic's Lien statute in New Jersey, it seemed clear that in the absence of bad faith on the part of the creditor, the creditor was entitled to file the lien. See Atlantic City Lumber Co. v. Atlantic City, 104 N.J. Eq. 483, 485 (E & A 1929); Morris County Bank v. Rockaway Manufacturing Co., 14 N.J. Eq. 189, 192 (Ch. 1862). It is not clear if this interpretation will survive under the current Construction Lien law. However, one federal decision in the area of municipal mechanic's lien suggests that the materials must be incorporated into the project so the creditor is well advised to use caution when considering filing a construction lien for materials not incorporated into the project.
New Jersey Construction Lawyers
The Law Office of Bart J. Klein is a New Jersey litigation firm with experience in the area of construction litigation. We welcome you to contact us if you need legal counsel or representation from a construction lawyer with regard to a construction lien or any construction related matter.