Construction liens can be an effective tool for contractors when it comes to debt collection. Many small and medium-sized contractors elect not to pursue construction liens, because the procedures can be somewhat complicated, especially when dealing with residential real estate. However, when they choose to forego the filing of a construction lien, these contractors miss an opportunity to significantly enhance the likelihood of collection.
New Jersey has a comprehensive statute dealing with construction liens. Just about any type of contractor, whether providing supplies or construction services, has the ability to file a lien. It also matters not whether the contractor is a general contractor or subcontractor. The important point for contractors to realize is one of timing. A construction lien on commercial real estate must be filed within 90 days from the last date of work or services. With residential liens, there are additional steps that must be taken, including the filing of a Notice of Unpaid Balance and a Demand for Arbitration. Frequently, contractors will attempt to negotiate a payment or send letters attempting to collect, while the period of time for filing is expiring. Waiting to take action can be costly. The minute a contractor realizes that a general contractor or owner is not going to pay them, they should commence the process for filing a lien.
It is important to note that the procedure for filing liens differ, as noted above, when dealing with residential or commercial real estate. Moreover, if a contractor or supplier has worked on property that is owned by a public entity, the procedures are different as well. In either case, contractors should not be deterred from filing these construction liens. If done properly and timely, they can put a great deal of pressure on a general contractor or owner, who may be trying to squeeze a contractor or subcontractor at the end of a job. Contractors should also be aware that owners or general contractors
cannot force them to waive their lien rights. Any agreement that seeks to waive a contractor’s right to file a lien is void under New Jersey law.
In sum, construction liens provide a valuable tool in the arsenal of a contractor trying to fairly collect for work performed or supplies delivered. Even the smallest contractor can file a lien without incurring significant expense. Failing to do is missing a unique opportunity to collect a just debt.