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Can my GC file a lien without giving us a final AIA payment form or release of liens form.

New JerseyChange OrdersMechanics LienRight to Lien

We are building an office as a commercial property and our contractor has decided to add multiple costs to the final bill that were NOT approved change orders (cost to take out trash and accept deliveries). Thus, we have not agreed on the final price. He is completing the punch list and now threatening to file a lien on the property. We said we would pay him 98% of total job cost with the 2% retainage fee but need written agreement on price and a release of liens form. He has not agreed nor given a release of liens form. Thus far we have paid about 75% of the total project. Can he file a lien on the property and how can we prevent that. We are happily willing to pay but want documentation that he and his subs will not file a lien.

1 reply

Feb 10, 2020
A general contractor can certainly file a mechanics lien without providing lien waivers, and nothing in the New Jersey mechanics lien statute will prevent a contractor from filing a lien claim before their final payment documentation is squared away. Honestly, it's pretty common for a contractor to file a mechanics lien when there's a dispute on what's owed. With that being said, contractors will have a hard time collecting on a mechanics lien claim if the amount of the claim is increased by unauthorized change orders. In fact, that's a common reason mechanics lien claims are shot down as invalid or unenforceable - when they're overstated due to unauthorized charges. While the New Jersey mechanics lien statute allows change orders to be included, it allows amounts that are agreed upon. So, if a contractor has unilaterally executed change orders, then that could very well cause an issue with their lien claim. More on change orders and lien claims, here: Change Orders and Mechanics Lien Rights.

Fending off a New Jersey mechanics lien claim

With the above being said, it's hard to prevent a lien claim before it's even been filed (though there are a number of options for challenging a mechanics lien after it's been filed). Generally, if there's a sound enough relationship in place, it's a good idea to try and talk out the issue and potentially negotiate terms that are agreeable to both parties. And, requiring that lien waivers be exchanged for payment would be pretty customary there. If talking out the issue doesn't work, sending a demand letter that identifies issues with the prospective lien claim and threatens legal action against a contractor can help to keep them from filing a lien. Notably, § 2A: 44A-15 of the New Jersey mechanics lien statute creates harsh penalties (loss of lien rights, damages) for mechanics liens that are willfully overstated - and that might be leveraged into keeping a claimant from filing their lien. Ultimately, though, if legal posturing (or even legal action) becomes necessary, it might be helpful to first consult with a local New Jersey construction attorney for advice on how to move forward.
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