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Who do we file the lien against

Anonymous General Contractor

Hi, We are in the process of filing a lien for an unpaid balance on a construction contract. According to our construction contract, the owner of the hotel is Secaucus Lodging Assoc, 5701 Progress Rd., Indianapolis, IN 46241. Your research team found that HMGL LLC owns the actual property. We are inquiring as who to file the lien against. If the hotel owner has a land lease agreement, who would we file against- the owner of the property or the hotel owner? Or if Secaucus Lodging Assoc didn’t close on the property yet but will close once there is a CO issued – who would we file a lein against now ? only the current land owner or Secaucus lodging too ? Or if we lose nothing by filing now against both of them then we would do that.. Please let us know how we can be fully protected. Thank you

1 reply

Matt Viator

Construction Lawyer

Levelset Admin at Levelset

| 1,005 reviews

Jun 1, 2020

New Jersey's mechanics lien statute doesn't account for every possible situation. So, there won't be a black and white answer to every question you posed above. Still - New Jersey's mechanics lien statute does cover quite a bit of ground. After taking all of the below information into consideration, it should be easier for you to determine who your lien should be filed against.

How is "owner" defined in New Jersey's mechanics lien statute?

First, § 2A: 44A-2 of the New Jersey lien statute defines an "owner" as "any person, including a tenant, with an interest in real property who personally or through an authorized agent enters into a contract for improvement of the real property." So, the statute defines owners to include both fee owners of the property and tenants (or others) who have some interest in the property where the work is taking place.

What does the lien attach to?

New Jersey mechanics liens attach to "the interest of the owner," under § 2A: 44A-3(a). Generally, this refers to the owner of the improvement - so, if the party who's authorized the improvement is the tenant, then the tenant's interest would be lienable. Or, if the fee owner is the one who's undertaken the improvement, then their interest could be liened. Notably, if the tenant is improving the property but the fee owner is heavily involved in the project - authorizing, overseeing, or even directing the work - then their interest might be lienable too. Regardless - even if only the tenant's interest is lienable, a lien could be really useful. If a company is serving as the tenant and will be in charge of running the hotel, a lien being filed against it could put them in breach of that agreement and create headaches. Levelset discusses mechanics liens and tenant improvements here: What Happens to Mechanics Lien Rights If My Project is a Tenant Improvement?

What to do if you're unsure of who's the owner of a New Jersey project

If you're confident that the fee owner and tenant are both involved in the project, then filing a mechanics lien listing both parties as owner may make sense. Plus, New Jersey specifically allows mechanics liens to be amended to cure inaccuracies or errors in the original lien claim. Meaning, it's possible to correct mistakes if you later become aware of an issue with the lien. Though, generally, amendments should be made within the time to file the original lien. Further, note that there's a difference between an honest mistake and fraud. So, even if there is an issue with the lien claim, that doesn't automatically mean the lien will be invalid, and that doesn't mean the error automatically constitutes fraud or will cause you to pay damages. In fact, § 2A: 44A-15, which creates penalties for improper liens, specifically targets lien claims that are without basis, in the improper form, willfully overstated, or beyond the deadline.

What happens to New Jersey mechanics liens when the project property is sold?

If the project was completed then sold before the lien was filed, that would spell trouble for the lien claimant. § 2A: 44A-6 states that mechanics lien claims must be filed to be effective against bona fide purchasers who didn't have notice of the lien filing before purchasing the property. But, if the purchaser becomes aware of the impending lien filing, or if the lien is filed before the sale, then the lien would be effective against purchasers. So, if you think a property sale is impending, it could be useful to go ahead and send notice of the lien to the purchaser even before the lien gets filed. If the property was purchased mid-project, that would be less cut and dry. If work continued after the purchaser got their hands on the property, then they may ultimately step into the shoes of the prior owner - thereby allowing for lien claims against their interest. Plus, if they allow the work to continue on the project, they'd be authorizing the work themselves.

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