New Jersey Construction Lien Law Revised

On January 5, 2011, nearly two years after the New Jersey Law Revision Commission released its final report in which it called for significant revisions to the Construction Lien Law (Title 2A:44A-1 et seq.) (the "CLL"), Governor Chris Christie signed into law significant amendments to the CLL (the "Amendments"). The Amendments were undertaken for purposes including:

(i) the elimination of contradictory interpretations of the CLL by federal and state courts; (ii) the clarification of the meaning and application of key concepts; and (iii) the removal and revision of language that was, in many cases, "awkward and imprecise." Set forth below are among the most noteworthy Amendments to the CLL:

The CLL now clearly differentiates between "filing," "lodg[ing] for record," and "indexing." Under the CLL, a document is "lodged for record" when the document "is delivered to the county clerk and marked by the clerk with a date and time stamp or other mark indicating the date and time received." A document is "indexed" when the clerk actually records the lien. Only when the document has been both "lodged for record" and "indexed" is the document considered to have been "filed." The significance of this nuanced terminology is that a lien claim that has been "lodged for record" is enforceable only against those persons who are provided notice of the document, whereas a "filed" document (i.e., one that has been both lodged for record and indexed) is treated as putting the world on record notice. (2A:44A-2).

"Residential construction" is now clearly defined to encompass - in addition to single-family residences - multiuse and multi-dwelling properties such as condominiums and cooperatives. (2A:44A-2).

The "lien fund" is now expressly defined as that "pool of money from which one or more lien claims may be paid. The amount of the lien fund shall not exceed the maximum amount for which an owner can be liable." This language is designed to protect against an owner's having to pay twice on the construction contract in certain circumstances. Additionally, the section detailing how to calculate the lien fund has been revamped and now clarifies what payments by the owner will (and will not) serve to lower the lien fund amount. (2A:44A-2; 2A:44A-9).

In recognition of the additional requirements for filing a lien against "residential construction" (i.e., the NUB and demand for arbitration), the Amendments make clear that a lien against a residential construction contract is to be filed within ten (10) days of the arbitrator's determination and no later than 120 days following the date of the last provision of work, services, material, or equipment. Commercial liens must still be filed within 90 days following the date the last work, services, material, or equipment was provided for which payment was claimed. (2A:44A-6).

The Amendments make clear that liens filed against "community associations" attach to the association, not to the real property interest of the unit owners. (2A:44A-3).

As a general matter, liens filed for work, services, material, or equipment contracted for by a tenant will attach only to the leasehold estate of the tenant. In such instances, the lien will attach to the real property only if the owner of the property: (a) expressly authorized the work in a signed writing that provides that the real property is subject to a lien; (b) has paid, or agreed in writing to pay, the majority of the cost of the improvement; or (c) is a party to the lease that created the leasehold interest of the tenant and the lease provides that the property interest is subject to lien for improvement. (2A:44A-3).

The form by which to make a lien claim have been updated to "be easier to understand, more relevant to industry practice, and more useful for its intended purpose." (2A:44A-8; 2A:44A-11).

The attorneys in the Construction Law practice group at Day Pitney are readily available to provide guidance with respect to the recent Amendments to the CLL. Should you have any questions or concerns about how the Amendments to the CLL affect you, or to request assistance with respect to compliance with the provisions of the CLL, please contact one of the individuals listed on the side of this alert.

?

?