New Jersey notice of unpaid balance and right to file lien

Work out which kind of job you are on before anything else

Everything on this page turns on one question, and it is not a question about the size of the job or the money on it. A residential construction contract is the trigger, and it drags in a different statute, a different deadline and an arbitration you will not expect.

On a commercial job, this notice is a choice. 2A:44A-20(g) says failure to file it shall not affect the claimant's lien rights under the act, to the extent that no conveyance, lease or mortgage of an interest in the real property happens before the notice or the lien claim is filed. Read that sentence for what it does not promise. Your lien right survives, but only for as long as nothing gets recorded against the property in front of you.

On a residential job it is not a choice at all. 2A:44A-5(c) says no lien attaches and no lien claim may be filed for work furnished pursuant to a residential construction contract unless there is strict compliance with sections 20 and 21. Strict compliance is the phrase to respect. It is not substantial compliance and it is not a good faith effort.

So the first thing to do on any New Jersey job where you might not get paid is to write down which of the two you are on, and to do it while the job is still running rather than in the week the money goes quiet.

The residential clock, and the three deadlines hanging off it

Sixty days is the headline and it is the easy part. 2A:44A-21(b)(1) says the notice is lodged for record within sixty days following the last date that work, services, material or equipment were provided for which payment is claimed. Not sixty days from the invoice and not sixty days from the day the owner stopped answering.

Then it keeps going. 2A:44A-21(b)(2) says that upon its lodging for record, the notice shall be served in accordance with the provisions for the service of lien claims in section 7. That is the ten day service window, registered or certified mail or commercial courier simultaneously with ordinary mail, and it applies here even though the same notice on a commercial job is served on nobody.

2A:44A-21(b)(3) is the one that surprises people. Unless the parties have agreed in writing to an alternative dispute resolution mechanism, within ten days from the date the notice is lodged for record the claimant shall also serve a demand for arbitration and fulfil all the requirements and procedures of the American Arbitration Association to institute an expedited proceeding before a single arbitrator. Ten days, and the arbitration is yours to start.

2A:44A-21(b)(6) puts a clock on the arbitration itself: the determinations shall be made and the proceeding completed within thirty days of the AAA receiving the demand, and those time periods shall not be extended unless the parties agree and the arbitrator approves. Then 2A:44A-21(b)(8) gives you ten days from receiving the determination to lodge the lien claim and furnish any bond the arbitrator ordered, and says that failing to do either inside the ten days shall cause any lien claim to be invalid.

Add them up and a residential lien in New Jersey is a sixty day notice, a ten day service, a ten day arbitration demand, a thirty day arbitration and a ten day filing. That is the real shape of it, and the sheet on this page is only the first step.

What it buys you on a commercial job

2A:44A-10 sets the ordinary rule and it is unkind. A lien claim shall not have priority over any mortgage, judgment or other lien or interest in real estate first recorded, lodged for record, filed or docketed, except as provided by sections 20 and 22. Your lien attaches from the time the lien claim is filed and everything already on the record beats it.

Section 20 is the exception in your favour. 2A:44A-20(b) says a lien claim validly filed shall have priority over a prior conveyance, lease or mortgage of an interest in the real property only if a notice of unpaid balance and right to file lien is filed before the recording of the document evidencing that conveyance, lease or mortgage. The notice is what moves your priority date backwards to the day you filed it.

2A:44A-20(d) is the sentence that makes it work. After the filing of a notice, any person claiming title to or an interest in or a lien upon the property described in it shall be deemed to have acquired that title, interest or lien with knowledge of the anticipated filing of a lien claim, and shall be subject to the terms, conditions and provisions of that lien claim. A buyer or a lender searching the title finds your notice and takes subject to what follows it.

Section 22 is the other half and it is where construction mortgages sit. 2A:44A-22(a) says every mortgage recorded before the filing of a lien claim or of a notice of unpaid balance has priority to the extent that it secures funds already advanced, or that the mortgagee is obliged to advance, before that filing. A construction loan already on the record is in front of you for what it has funded, and filing the notice is what draws the line under that.

Four things this notice is not

It is not a lien. 2A:44A-20(f) says the lodging for record or filing of a notice of unpaid balance shall not constitute the lodging for record or filing of a lien claim, nor does it extend the time for lodging a lien claim. Filing it does not start the year you have to sue in and it does not buy you a day on the ninety.

It is not served on anybody, on a commercial job. 2A:44A-20(c) says a claimant electing to file the notice need not serve a copy upon any interested party. That word electing is doing work: it is the commercial case, where filing is an election. The residential case is 2A:44A-21(b)(2) and there you do serve it.

It is not permanent. 2A:44A-20(e) says the notice shall be effective for ninety days, or in the case of a residential construction contract claim for one hundred and twenty days, from the date of the provision of the last work, services, material or equipment for which payment is claimed as set forth in paragraph 4 of the notice. It expires on the same clock the lien claim runs on, because it is holding a place for the lien claim.

It is not one shot. 2A:44A-20(h) says a notice may be amended by filing an amended notice of unpaid balance and right to file lien in accordance with the same section. If the number moves before you file the lien claim, the notice can move with it.

The money section, and the ceiling that sits over it

Item 5 on the form is lettered A through G and ends with TOTAL LIEN CLAIM AMOUNT E minus the sum of F and G. A is the initial contract price, B the executed amendments and change orders, C the total of the two. D is there for a contract that is not complete, where the answer is the value of what has actually been provided. E is the total from C or from D, whichever applies, F the agreed upon credits and G the amount paid to date.

That arithmetic gives the amount you claim. It does not give the amount you can collect, and 2A:44A-9 is the section that decides the difference. Subsection a. caps the claim itself: the amount of a lien claim shall not exceed the unpaid portion of the contract price of the claimant's own contract.

Subsection b. caps the fund the claim draws on. For a first or second tier claimant the lien fund shall not exceed the earned amount of the contract between the owner and the contractor, minus any payments made before service of a copy of the lien claim. For a third tier claimant it is the lesser of that and the earned amount of the contract between the contractor and the subcontractor above you.

Subsection d. is the blunt one. No lien fund exists if, at the time of service of a copy of the lien claim, the owner has fully paid the contractor for the work performed. Subsection c. then lists what does not count as payment for that purpose, including payments not in accordance with written contract provisions, payments yet to be earned when the claim was lodged, liquidated damages, collusive payments and setoffs or backcharges absent written agreement.

2A:44A-9(g) closes it: no lien rights shall exist for other than first, second or third tier lien claimants. A fourth tier supplier on a New Jersey job has no lien to preserve and no reason to file this notice.

Where to file it and what it costs you to be wrong

It is lodged for record with the county clerk of the county the property is in, which is why the first line on the sheet addresses that clerk by county rather than addressing the owner. It goes onto the land records, in the same place a buyer or a lender looks.

The property is identified by block and lot on the municipal tax map rather than by a street address, and the form asks for both plus the municipality. That is how New Jersey indexes land and a notice describing the property only by its road name is describing it in a way the record does not use.

The penalty section is 2A:44A-15 and it is written about lien claims rather than about this notice, but the discipline it imposes reaches back here, because what you put on the notice is what the lien claim is measured against. A claim that is without basis, willfully overstated, or not lodged in substantially the form or manner or at a time the act allows, forfeits all claimed lien rights to the extent of the face amount claimed, and carries costs, reasonable legal expenses including attorneys' fees, and a judgment for damages.

Subsection d. defines without basis as frivolous, false, unsupported by a contract, or made with malice or bad faith or for any improper purpose. Rounding up because the owner is being difficult is not one of the safe reasons.

Where the words came from

Every word of the form on this page was sliced out of the statute text by line number and never retyped. Retyping is how a wrong word gets into a form and then stays in it.

The build source is N.J.S.A. 2A:44A-20 published at codes.findlaw.com, current as of 1 January 2024, and the key is the same section at law.onecle.com. Over seven thousand three hundred characters with blank lengths collapsed the two publishers differ in two places, and on this state the key caught findlaw rather than onecle, which had not happened on any earlier state.

findlaw's page carries, above the form, a block of money lines headed Total contract amount, Amendments to contract, Less agreed upon credits and Contract amount paid to date. onecle does not have it anywhere. It is not a block onecle lost: it is the pre-2010 version of the form's money section, left stranded at the head of the page. Three things say so. It sits above the form's own opening line, and a form cannot total its money before it has addressed the clerk it gets filed with. findlaw prints the current calculation later in the same section, lettered A through G, and onecle prints that character for character. And the lettered version is what P.L.2010 chapter 119 put in, which is the edition onecle is on.

The stranded block is therefore not on the sheet. With it gone the two publishers agree at zero differences across the form, and the keying is deliberately run before the block is dropped so the difference count stays a real measurement that will move if New Jersey amends the section.

Both copies are parked in the repository beside each other so the comparison can be checked rather than taken on trust.

Questions people ask

Once the job is running and you are getting paid on it, the paperwork that comes next is the waiver: see the New Jersey statutory lien waiver forms, and conditional vs unconditional lien waiver for which of the two to sign.