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A revised version of New Jersey’s Construction Lien Law, N.J.S.A. 2A:44A-1, et seq. (“Lien Law”), was signed into law by Governor Chris Christie on January 5, 2011. The revised version is effective immediately.

Significantly, the revised Lien Law includes apartment buildings, condominiums, housing cooperatives, townhouse developments, and planned unit developments within the definition of residential projects under the revised Lien Law. As such, these types of projects are now subject to the more rigorous requirements established to allow parties to obtain liens over residential projects as compared to the requirements laid out for commercial projects.

Also new in the revised statute, claimants looking to file a lien against a residential project must lodge for record a Notice of Unpaid Balance and Right to File Lien with the recording office within 60 days of completing work on the project. The “lodge for record” designation indicates the time at which the recording office receives the documents, rather than measuring from the date the office actually records the lien. Within 10 days from the date the Notice of Unpaid Balance and Right to File Lien is lodged for record with the recording office, claimants must serve a demand to commence arbitration with the American Arbitration Association. The arbitrator must provide approval for the lien before the claimant can take further action. Ten days after the claimant receives a determination as to the validity of the lien claim from the arbitrator, and within 120 days of completing work on a residential project, the claimant must send the lien to the recording office to be filed. The claim is not valid if sent to the recording office more than 120 days from the “date the last work, services, material or equipment was provided for which payment is claimed” or more than ten days after the arbitrator’s determination.[1] The time frame for commercial projects has not been altered by the recent revisions and remains at 90 days after completing work on the project.

The revised statute codifies many aspects governing construction liens and the lien fund that were previously only established in state court decisions. The lien fund is defined as “the pool of money from which one or more lien claims may be paid. The amount of the lien fund shall not exceed the maximum amount for which an owner can be liable.”[2] The revisions make clear that if a party pays the specified amount due from the Notice of Unpaid Balance prior to receiving notice of the lien claim then no lien fund exists from which the claimant can obtain money. This ensures that a party will not pay again for an amount due if that party has already satisfied its obligation. Further, the revised statute expressly lays out the types of payments made by an owner that do not serve to reduce the lien fund. These types of payments do not serve to “discharge the obligations for the work performed or services, material or equipment provided” and include: “payments not in accordance with written contract provisions,” liquidated damages, and collusive payments, among others.[3]

The Lien Law changed with respect to liens for improvements to property held by tenants as well. Under the revised statute, the lien only attaches to the “leasehold estate of the tenant” unless the landlord “expressly authorized the contract for improvement in writing[;] . . . has paid, or agreed in writing to pay, the majority of the cost of the improvement; or is a party to the lease or sublease that created the leasehold interest of the tenant and the lease or sublease provides that the person’s interest is subject to a lien for the improvement.”[4] This serves to expand the situations in which a lien may attach to the owner of the property.

The revisions came as a result of the New Jersey Law Revision Commission’s Final Report on the Construction Lien Law, and were intended to clarify and codify the procedures for properly obtaining a lien as well as properly discharging a fully satisfied lien.

Notes:
[1] N.J.S.A. 2A:44A-6 (2011) and N.J.S.A. 2A:44A-21.

[2] N.J.S.A. 2A:44A-2.

[3] N.J.S.A. 2A:44A-9.

[4] N.J.S.A. 2A:44A-5.

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