New Jersey

Between residential and commercial projects, lenders should confirm property type and ensure compliance with all notice, filing, and arbitration requirements. Failure to adhere to the statutory procedures can result in an invalid lien claim.

New Construction vs. Improvements
New Jersey’s Construction Lien Law applies to both new construction and improvements or alterations of existing structures. The lien statute, however, does not create a significant legal distinction between these project types in the way some states do. Instead, lien rights and requirements are driven more by the nature of the contract and the type of property (residential vs. commercial) rather than whether the project is a new build or a renovation.

Applicability to Construction Types

• New Construction: Contractors, subcontractors, and suppliers who contribute to the construction of a new structure are eligible to file liens if unpaid. Lien timing and notice requirements apply based on whether the property is commercial or residential.
• Improvements, Renovations, or Alterations: The statute allows lien rights for those who perform work or supply materials that result in permanent improvements to existing structures. This includes remodeling, repair, or expansion work that enhances the value of the property.

Key Considerations

• Written Contract Requirement: Regardless of project type, lien claimants must have a written contract or written evidence of a contract to assert lien rights (§ 2A:44A-3).
• Valuation and Scope: The scope of work must result in a tangible, permanent improvement to qualify for lien protection (§ 2A:44A-2).
• No Separate Filing Category: New Jersey does not require separate lien claim forms or filing processes for new construction versus improvements. All lien claims follow uniform procedures regardless of project type (§ 2A:44A-6 for commercial, § 2A:44A-21 for residential).

Best Practice: Construction lenders should verify that contracts are written, clearly identify the nature of the work, and document the extent of improvements, especially for renovation projects. This helps determine lien eligibility and supports risk assessments during disbursement and final title issuance.

Other Statutory Lien Forms

New Jersey’s Construction Lien Law requires several forms depending on the type of property involved and the claimant’s role. The law does not include fill-in-the-blank templates but does prescribe the required content and timing of each form.

Common Lien-Related Filings and Forms (with Roles, Benefits, and Implications)

1. Notice of Unpaid Balance and Right to File Lien (NUB)
   Filed by: Subcontractors or suppliers on residential projects
   Benefit: Preserves the right to file a lien while providing formal notice to the property owner
   Implication if not used: Lien rights are lost on residential projects where the claimant is not in direct privity with the owner
   Deadline: Must be filed within 60 days of last furnishing labor or materials
   Statute: N.J. Stat. Ann. § 2A:44A-20
2. Lien Claim Form
   Filed by: Any contractor, subcontractor, or supplier asserting a lien
   Benefit: Establishes a formal and enforceable lien against the property
   Implication if not used: No lien rights are established, and the claim is barred
   Applicable to: All projects (residential and commercial)
   Deadline: Within 90 days (commercial) – § 2A:44A-6; within 120 days (residential) – § 2A:44A-21
   Content Requirements: Must include the amount claimed, description of the property, party names, contract basis, and verification by oath
3. Arbitration Demand (Residential Only)
   Filed by: The residential lien claimant (typically before filing the lien claim itself)
   Benefit: Ensures the validity of the lien and meets a statutory precondition to lien filing
   Implication if not completed: Lien claim is invalid and unenforceable on residential property
   Requirement: A lien claim on a residential project must be arbitrated before being filed
   Statute: N.J. Stat. Ann. § 2A:44A-21(b)
4. Lis Pendens (Notice of Lien Foreclosure Action)
   Filed by: The lien claimant after initiating a foreclosure action
   Benefit: Puts third parties and potential buyers or lenders on notice of ongoing litigation involving the lien
   Implication if not filed: Lien enforcement may be delayed or jeopardized in title transfer scenarios
   When Used: Filed after a foreclosure action is initiated on the lien
   Purpose: Alerts third parties that lien enforcement litigation is underway

Best Practices for Lenders

• Confirm that lien claimants on residential projects follow the Notice of Unpaid Balance and arbitration process.
• Require all lien filings to be checked against statutory deadlines and form requirements.
• Coordinate with title companies to track filings and ensure lien discharges are properly recorded.

Note: While New Jersey does not publish standardized statutory forms, practitioners are expected to prepare lien-related filings in strict compliance with statutory content and procedural mandates.

Lien Priority

New Jersey follows the principle of first in time, first in right for determining lien priority, but the Construction Lien Law introduces important nuances depending on the type of project and when certain filings occur.

General Rule

• Priority is generally based on the date of the visible commencement of work, not the date of the lien filing (N.J. Stat. Ann. § 2A:44A-10).
• A properly filed construction lien will relate back to the first date on which work, labor, or materials were first provided to the project (§ 2A:44A-10).

Priority Against Mortgages

• • A construction lien may take priority over mortgages recorded after the visible commencement of construction (§ 2A:44A-10).
  • Mortgages recorded prior to the commencement of work on the project generally retain superior priority over any subsequently filed construction liens (§ 2A:44A-10(c)).
  • For residential projects, a lien claimant’s priority position may be lost if the Notice of Unpaid Balance (NUB) (§ 2A:44A-20) or Lien Claim (§ 2A:44A-21) is not properly filed in accordance with statutory deadlines.

Mechanics Liens vs. Other Liens

• Construction liens do not have super-priority over federal tax liens (26 U.S.C. § 6323), previously recorded judgment liens, or certain municipal liens.
• Where there are multiple construction liens and proceeds are insufficient, they are generally resolved through a pro-rata distribution under court oversight (§ 2A:44A-24).

Best Practices for Lenders

• Ensure that the mortgage or deed of trust is recorded before the visible start of construction to preserve priority.
• Conduct a pre-closing inspection to document that no work has commenced.
• Monitor title and lien filings throughout the project, especially after significant disbursements.
• Work with the title company to obtain appropriate lien endorsements to protect priority status.

Note: Lien priority under New Jersey law depends on proper documentation, filing timelines, and visible construction activity. Title insurance and proactive project monitoring are critical tools for managing risk.

Lien Fund Alert: Under N.J. Stat. Ann. § 2A:44A-9, lien claimants can only recover from the lien fund, which is defined as the unpaid portion of the contract price at the time the lien is filed. This principle, affirmed in Legge Industries v. Joseph Kushner Hebrew Academy, means that payments made by the owner in good faith before the lien is recorded reduce the lien fund. Lenders must ensure disbursements are legitimate and traceable to actual work completed, or they risk eliminating the pool from which liens can be satisfied.