What Happens After I Record My Lien? New Jersey Webinar

In this webinar presented by SunRay Construction Solutions and Kyle Cassidy, Partner, Trif & Modugno LLC, we outline each step involved in enforcing a construction lien in New Jersey, including serving the lien, demanding payment, initiating litigation, and ultimately resolving the matter—either through settlement or foreclosure.

1. Serving the Lien

Once a lien is recorded, the very next and essential step is serving the lien, which is required to comply with New Jersey’s Construction Lien Law. There are two primary statutes that govern liens:

• Construction Lien Law – Applies to private projects.

• Municipal Mechanics’ Lien Law – Applies to public projects involving local or county entities.

For private projects, the lien must be served on the property owner and the party with whom the claimant has direct contractual privity (contractor or subcontractor). This must occur within 10 days of recording the lien.

Acceptable methods of service include:

• Personal service – Using a process server.

• Certified and ordinary mail – Both must be sent to the recipient’s last known business or residential address.

The timing and proof of service are critical. Late service doesn't automatically invalidate a lien, but if the recipient can show they were prejudiced—for example, if payments were disbursed in the interim—it can be grounds for dismissal.

In public projects under the Municipal Mechanics’ Lien Law, the public agency itself serves notice and may request proof from the claimant as to why payment should be withheld. These liens freeze project funds rather than encumbering the property.

2. Demanding Payment & The Prompt Payment Act

If serving the lien does not result in payment, the next strategic move is to demand payment. This typically involves sending a formal demand letter to the responsible party.

The letter may include:

• A deadline for payment (e.g., 10 days).

• Notice of intent to file a lawsuit.

• Reference to the New Jersey Prompt Payment Act, if applicable.

Under the Prompt Payment Act:

• Payment must be made within 30 days of invoice approval.

• If the owner does not object to an invoice within 20 days, payment is deemed certified.

• Claimants may suspend performance without penalty if payment is not received within 7 days after notice.

The Prompt Payment Act also allows for the recovery of interest, attorney’s fees, and costs—remedies not provided under the Construction Lien Law.

3. Filing a Lawsuit to Foreclose the Lien

If payment is still not made, the next step is to commence litigation.

For private projects:

• The lawsuit must be filed within one year of the last date of work or material delivery (not the lien filing date).

• The case must be brought in the county where the property is located.

• The complaint should join all relevant parties, including the property owner, general contractor, subcontractors, and other lienholders.

If a dispute resolution clause (e.g., arbitration) exists in the contract, the court will stay the foreclosure action pending the outcome of arbitration—but the lawsuit must still be filed within the statutory one-year window.

The complaint may include:

• Foreclosure of lien

• Breach of contract

• Prompt Payment Act claims

• Quasi-contract claims (for unsigned change orders or additional work)

For public projects:

• The lawsuit must be filed within 60 days of the project’s completion or acceptance.

• It should name the public agency, contractor, subcontractor, and any other lien claimants.

• Like private projects, the suit should be filed in the county where the agency is located.

4. Filing a Lis Pendens

In private projects, filing a lis pendens with the county clerk is mandatory when a foreclosure action is initiated. This document:

• Notifies the public of the pending litigation.

• Must include the lawsuit’s docket number, involved parties, and a legal property description.

Each county has specific administrative requirements, such as cover pages and filing fees. Some may also require appointments for in-person filings, so it's essential to check local procedures to avoid rejection due to technicalities.

5. Litigation Strategies

During litigation, several tactics may help resolve the matter favorably:

• Bonding off the lien: A surety bond can replace the lien, providing a financial guarantee in lieu of the property encumbrance.

• Discovery: Requesting documents from the property owner can create pressure on the general contractor, especially if contractual obligations require the property to remain lien-free.

• Alternative payment avenues: Replacement contractors or financiers who continue stalled projects may become potential sources of recovery if the original contractor defaults.

6. Resolution & Enforcement

Ideally, the matter concludes with a settlement, documented through a written agreement. Upon payment, the lien and lis pendens must be formally discharged through filings with the county clerk.

If no settlement occurs, the case proceeds to judgment and foreclosure. If successful, the court may order:

• Sale of the property (if no bond was posted), with proceeds distributed to lienholders by priority.

• Payment from a surety bond, if one replaced the lien.

For public projects, the court will determine lien validity and direct the public agency to pay from retained project funds.

Key Takeaway

New Jersey’s construction lien process is complex, but each step provides essential leverage to secure payment. From properly serving the lien and invoking the Prompt Payment Act, to filing suit and using strategic litigation tools, understanding this framework is crucial for maximizing recovery. Tools and services provided by Sunray can further streamline the lien process and ensure statutory compliance every step of the way.

Common Questions Contractors Ask

1. Can I still file a lien or make a bond claim if I didn’t send a preliminary notice?
It depends on the type of project (private or public) and the type of bond involved.

• For public projects in New Jersey, a payment bond is required by statute to protect subcontractors and suppliers.

• If you are a subcontractor to the general contractor, you typically do not need to provide prior notice before making a claim on the bond.

• However, if you are a sub-subcontractor or supplier to a subcontractor, notice is required, and failure to provide it can disqualify your claim.

• If you're dealing with a lien bond (used to replace a construction lien on a private project), there is no preliminary notice requirement.

• This type of bond is obtained after a lien has been filed, and its purpose is to replace the lien.

• Since the bond comes into play after the lien is recorded, no prior notice is required to enforce rights against the bond.

2. Is there any exception to the one-year deadline to file a foreclosure lawsuit after work is performed?

No. New Jersey’s Construction Lien Law imposes a strict one-year deadline to file suit to foreclose on a lien, and that deadline runs from the last date of work or material delivery—not from the date the lien was filed.

• This is a black-and-white rule with no exceptions.

• Courts have dismissed foreclosure lawsuits filed just a few days late, even if the claimant misunderstood the deadline.

• Since liens must be filed within 90 days of the last date of work, there's often a gap between the lien date and the actual lawsuit deadline—do not confuse the two.

Pro Tip:
Immediately after filing a lien, calendar the one-year deadline from the last date of work, and set reminders in advance (e.g., 2 months out) to allow enough time to consult an attorney and prepare for litigation.  

3. If I’ve been paid and need to discharge my lien, do I need to file separate releases for the lien and the lis pendens?  
‍Yes. The lien and lis pendens are separate legal documents, often filed in different offices within the County Clerk’s office. Each must be discharged individually.

• You'll need to submit two separate discharge documents, with their own cover pages, filing fees, and sometimes sent to two different departments.

• The same applies on the front end—both the construction lien and lis pendens must be filed separately.

Failing to release both can cause delays in closing, title issues, or other administrative problems, so be sure to handle both discharges properly.