My company works as the general contractor on residential projects in New Jersey. Can you lay out the order of the steps we need to take in order to secure and claim our lien rights?
Apr 4, 2018
New Jersey's process for filing a residential mechanics lien is pretty convoluted, but bear with me. It's actually a 3 part process: (1) filing a Notice of Unpaid Balance, (2) making an Arbitration Demand, and (3) the actual lien filing.
The Notice of Unpaid Balance operates a lot like a Notice of Intent to Lien, but it's a document that must be filed with the County Clerk in the county where work was performed. The document has a lot of strict form requirements, but it's appropriately named - essentially, it just provides notice that some amount of payment remains due and that the right to file a lien may be present.
Step two of this process is the Arbitration Demand, which is also a filed document. This document must be filed with the American Arbitration Association (unless another party is specified to arbitrate claims in the construction contract). The Arbitration Demand must also follow strict requirements (including attaching the previously filed Notice of Unpaid Balance, proof of delivery of that Notice, and documentation to substantiate the claim of nonpayment), and it formally demands arbitration over the unpaid amount. Again, this demand is required - and it's really unlike any pre-lien requirement in any other state.
As a result of this Demand, the claim will be reviewed by the American Arbitration Association and an arbitrator's determination will be rendered on the dispute. There is technically no deadline to send the Arbitration Demand - but there is a deadline to file a mechanics lien (which is the next step). The arbitration that follows an Arbitration Demand will take at least 30 days in most cases. Since the deadline to file a NJ mechanics lien will not be extended by ongoing arbitration, it's a good idea for a claimant to make the Arbitration Demand as early as possible so that the lien deadline is not compromised.
Anyway, the final step of this process is the actual lien filing. On residential property, a mechanics lien must be lodged for record within 120 days of the claimant last furnishing labor or materials to the project, but also within 10 days after the lien claimant receives the arbitrator’s determination. The work isn't done yet, though- the lien must then be served on the property owner within 10 business days from the date it was lodged for record.