Source: https://www.greenbaumlaw.com/insights-publications-198.html
Timestamp: 2019-04-23 19:02:57+00:00

Document:
After a year-long, intensive study by the New Jersey Law Revision Commission1, the New Jersey Legislature and Governor Chris Christie enacted on January 5, 2011 a much needed revision to the New Jersey Construction Lien Law (N.J.S.A. 2A:44A-1, et seq.). The amendments clarify the statute, which was last amended in 1994, and align it with numerous appellate court decisions. The amendments, which take effect immediately,2 include several significant changes which owners, contractors, subcontractors, and suppliers must understand and appreciate.
In response to concerns from attorneys involved in construction law, parties aggrieved by lien claims relating to the same residential construction project are now permitted to be joined in a single construction lien arbitration proceeding.7 If possible, the same arbitrator shall determine all such claims, even if joinder in the same arbitration is not possible.8 Finally, arbitrators determining lien claims must consider the outcome of all previous proceedings relating to the same construction project.9 The overarching purpose of these new requirements is to avoid inconsistent arbitration awards.
In Cherry Hill Self Storage, LLC v. Racanelli Construction Company, Inc., the Appellate Division required the landlord to expressly authorize improvements in writing before it would attach a lien to the fee interest.30 The court reached this conclusion notwithstanding that the lease permitted the tenant to make improvements and required the landlord to contribute to the project.31 The amended statute counters the effect of Racanelli.
Nearly fifty years ago, the New Jersey Supreme Court held that suppliers to suppliers were ineligible to file a construction lien claim.35 While some of the new statutory definitions appear to abrogate the Court’s holding, a closer look at the definition of “supplier,” which was not substantially amended, confirms that a supplier to supplier still may not file a construction lien.36 Moreover, nothing in either the Law Review Commission’s Final Report or the Legislative history for the recent amendments indicate an intent to permit a supplier to supplier to file a lien.
The recent amendments to the Construction Lien Law remove much of the ambiguity that became apparent over sixteen years of application. As a result of over a year of input by the Courts, the Bar, the Law Revision Commission, various interest groups, and the Legislature, the statute is now easier to understand and more comprehensive to the benefit of all parties and the construction process.
1 New Jersey Law Revision Commission, FINAL REPORT RELATING TO CONSTRUCTION LIEN LAW (Mar. 2009).
2 A. No. 410, ¶ 26, 2010 Leg., 214th Sess. (N.J. 2010).
17 N.J.S.A. § 2A:44A-33(d). Other state courts have held that when a bond is filed to discharge a private lien, the owner is no longer a necessary party to an action to enforce the lien. See M. Gold & Son, Inc. v. A.J. Eckert Inc., 667 N.Y.S.2d 460, 461 (3d Dep’t 1998); Frank Curran Lumber Co. v. Eleven Co., 76 Cal. Rptr. 753, 758 (Cal. Ct. App. 1969); Mesch v. Berry, 528 So. 2d 1250, 1252 (Fla. Dist. Ct. App. 1988); Vector Co., Inc. v. Star Enters., Inc., 206 S.E.2d 636, 638 (Ga. Ct. App. 1974); Shelton Eng’g Contractors, Ltd. v. Hawaiian Pac. Indus., Inc., 456 P.2d 222, 226 (Haw. 1969).
19 See, e.g., Michael J. Wright Constr. Co. v. Kara Homes, Inc., 396 B.R. 131 (D.N.J. 2008), affirming In re Kara Homes, Inc., 374 B.R. 542, 552 (Bankr. D.N.J. 2007).
20 In re Kara Homes, Inc., 374 B.R. at 549-50.
24 Id.; N.J.S.A. § 2A:44A-2.
27 N.J.S.A. § 2A:44A-3 (e).
30 CherryHill Self Storage, LLC v. Racanelli Constr. Co., No. A-5727-05T5, 2007 WL 1756914 (N.J. App. Div. Jun. 18, 2007).
33 N.J.S.A. § 2A:44A-9; Riggs Distler & Co. v. Valero Ref. Co., Civ. A. No. 03-5854 (FLW), 2005 WL 2897483 (D.N.J. Oct. 31, 2005).
34 Riggs Distler & Co., Inc., Civ. A. No. 03-5854 (FLW), 2005 WL 2897483.
35 MorrisCountyIndus. Park v. Thomas Nicol Co., 35 N.J. 522, 530-33 (1961).
36 The new statutory definitions for first, second and third tier lien claimants are a source of confusion. A “first tier lien claimant” is a contractor. N.J.S.A. § 2A:44A-2. A “second tier lien claimant” is either a subcontractor or a supplier to a contractor. Id. A “third tier lien claimant” is “is a subcontractor to a second tier lien claimant or a supplier to a second tier lien claimant.” Id. Applying these definitions, it may seem at first glance that a third tier claimant could be a supplier to a second tier supplier. However, notwithstanding these new definitions, the definition of “supplier” reveals that a supplier must have “direct privity of contract with an owner, community association, contractor or subcontractor in direct privity of contract with a contractor.” Therefore a supplier, by definition, cannot be a supplier to a supplier. Thus, a supplier to supplier may not file a lien.
41 Thomas Group, Inc. v. Wharton Senior Citizen Hous., Inc., 163 N.J. 507, 521-22 (2000); N.J.S.A. § 2A:44A-24(c).

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