I am a General Contrator in New Jersey. I have a residential client that is currently engaged in a contract with me to build their house. I have received a deposit along with the first contractual payment. They have in formed me that they only have enough money secured to make the next two contractual payments leaving a shortage of approximately $265,000.00. They are in the process of attempting to get funding but there is nothing set in place as of yet. After the next two payments are made the project will have to come to a halt until funds are secured. I am not sure what the next step should be. What if they can't secure funding at all? My concern is that they entered in to a contract without having proper funding. Can I put a lien on the property prior to them defaulting their first payment?
In NJ, mechanics liens can only be filed for the value of work installed per a written agreement on a piece of real property. So, no, you cannot file a lien for work which you have not yet installed. However, if the homeowners have already stated that they will not be able to pay for improvements which you agreed to install per the contract, that would be considered an anticipatory breach of contract. This is a recognized cause of action to sue in NJ, but it sounds like your needs would be better served by sending a letter that you are suspending performance per the homeowners' representation that they will not be able to pay.
I would caution you that you ought to have confidence in your form of contract before you attempt to seek its protection. The Consumer Fraud Act is the bane of NJ Home Improvment Contractors, because the form of the contract for home improvements is strictly mandated by both statute and regulation. Deviations from the required form can render the contract unenforcable and entitle aggrieved homeowners to treble damages and attorney fees. I also note that residential liens in NJ require that a Notice of Unpaid Balance first be filed, as well as a demand for arbitration with the American Arbitration Association.