“There’s no time like the present”—cliché or not, this may become the new rule for when contractors should file their New Jersey lien claims during the pandemic, and probably after. Unlike lawsuits and other legal actions, New Jersey liens do not begin with a court filing but rather a submission to a county clerk’s office in the county where the project is located. Because COVID-19 restrictions have affected the clerks’ pace in handling and filing these claims, contractors must present their liens with sufficient lead time to ensure county clerks process them before the filing deadline.
The New Jersey Construction Lien Law gives the right to file a lien claim for unpaid amounts to general contractors and most subcontractors and suppliers that provide work, labor, and materials on a private construction project under a written contract. Once filed, this lien claim provides a security interest on the real property where the construction work was performed. As a security interest, a lien can prevent an owner from selling or mortgaging a property until the claim is resolved. As a result, a construction lien claim pressures the owner to ensure contractors and subcontractors are timely paid. To use this powerful tool, a contractor, or more often, a subcontractor, must record a construction lien claim in a county clerk’s office within 90 days of the contractor’s last date of work on the project. Otherwise, the lien is ineffective.
Despite this strict 90-day cut-off date, contractors often wait to file a lien until close to the deadline, usually for good reasons:
- Many contracts do not require payment until at least thirty days after the final pay application is submitted, so the legal right to payment does not exist until then.
- Contractors may believe that payment will be made and there is no reason to file a lien when payment will inevitably be made.
- Filing a lien while negotiating payment may chill negotiations.
- Waiting to file until just before the deadline defers legal fees until necessary.
The COVID-19 pandemic, however, has further complicated these strategic reasons for delaying filing. In many New Jersey counties, the county clerks’ offices have been operating remotely or at reduced capacity for the past year. Some counties are requiring liens be recorded electronically through a recording service only available to lawyers. Electronically submitted liens are not considered recorded until they are reviewed and accepted by a county clerk.
In many counties, reduced staffing has led to a backlog of documents waiting to be recorded in the clerks’ office. Due to this backlog, there is no guarantee that a lien will be recorded on the day it is submitted. Lags of several weeks between submission and recording have occurred recently. This means, for example, that a lien submitted for filing 70 days after the contractor’s last date of work might not be recorded until more than 90 days after the last date of work. For the Lien Law’s 90-day filing deadline, filing occurs upon the clerk recording the lien, not the contractor submitting it. So, these recent delays can turn a timely submitted lien into one nonetheless untimely filed. Several contractors have already experienced this harsh result.
The New Jersey courts and legislature thus far have remained mute on the issue, despite the problems the deadline has caused contractors. The filing deadline remains at 90 days without leeway for those liens filed before the deadline but officially recorded later due to clerk office delays. As a result, contractors should submit construction lien claims well before the deadline to protect their lien rights.
Fortunately, the lawyers at Cohen Seglias are experienced in filing construction lien claims. Even in these uncertain times, we are able to guide you through the process and make sure your lien rights are preserved.