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What course should I take?

Dear Sir, Sorry to contact you, I got your name from the internet research and from one of the articles(Budde,Nathan) you have published, hoping to get some guidance from you. I am new in construction industry. I started by building my own house. I hired a construction manager to build our own house and to enter in the construction industry. I found out one vendor myself for dive way pavers and backyard pavers. We signed a contract with him to finish above project of drive way and back yard for X amount of money including labor and materials charges. He completed job. He made me buy $ 6363.88 worth of material which I bought on my credit card and provided him. I mad him a full payment and provided material worth $ 6363.88 which he was supposed to purchase himself. Out of nowhere, I got a certified mail from a supplier from whom this vendor of mine bought some materials stating that they are bringing a lien against my property in the sum of $ 16621. 91 and included copies of 14 invoices which I have no knowledge of. So , I already paid my vendor his labor and material cost for the contract ,I have to pay again to the supplier of his the material cost even though I paid my vendor not only the material cost but also $ 6363.88 material I bought for him on credit. I am paying the material cost twice. Is there any justice in the USA? Can you show me how should I handle this situation. I feel like quitting the construction field I have decided to go into.

1 reply

Apr 29, 2019

I'm sorry to hear about the situation in which you have found yourself. The construction industry can seem like a mess when payment issues arise.

It appears that the situation you describe is as follows:

1. An agreement was signed with a construction manager to complete driveway and backyard paver work for a flat rate (the rate included labor and materials); 2. Materials were paid for using a credit card, and the materials were provided them for use on the job, and not reimbursed by the construction manager;
3. The contract amount was paid to the construction manager, in addition to the amount that was spent on the materials that were not reimbursed by the construction manager;
4. A supplier to the construction manager vendor, has threatened to file a lien for the allegedly unpaid amount of materials delivered to the project.

New Jersey has specific and strict mechanics lien laws and requirements related to residential projects. In New Jersey, "'Residential construction,' also referred to as 'residential housing construction' or 'home construction,' means construction of or improvement to a dwelling, or any portion thereof." To the extent the project is a dwelling, the more strict rules of residential construction projects apply.

There are a few things that should be considered when evaluating whether a mechanics lien is appropriate against residential property in New Jersey:

1. New Jersey is an "unpaid balance" lien state. This means that the amount of a mechanics lien may not exceed the price of the contract between the property owner and the original contractor less the amounts paid pursuant to that contract. This means that a suppliers lien may be limited to the amount the property owner has not yet paid the original contractor at the time a copy of the lien is served on the property owner. This is to ensure that the property owner is not required to pay twice for the same work.

What this means, specifically, is that if the property owner has paid the original contractor the full amount owed, the property is shielded from lien claims from lower-tiered parties.

In addition, to the extent that there is still some balance left on the original contract such that a lien may be claimed, there are very specific requirements that must be met in order to claim a lien on residential property. A Notice of Unpaid Balance and Right to Lien must be recorded within 60 days of the claimant's last furnishing of labor or materials to the project, and served on the property owner. And then, within 10 days of the date on which the notice of unpaid balance was recorded, an arbitration demand must be initiated in order to determine the lienable amount. Only after the arbitrator returns a determination that there is a lienable amount may the lien be filed, which must be done within 10 days of the return of the arbitrator's determination.

Accordingly, liens in New Jersey are not allowed when the original contract has been fully paid, and even when they are technically allowed are subject to stringent and particular rules and requirements.

It's always a best practice to obtain lien waivers from everybody in the project's payment chain as a way to ensure that the appropriate people are getting paid what they have earned, and to shield the project from potential lien claims.

I hope you can get everything figured out and continue a successful a construction business.

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