Real Estate Journal — Owners, Developers & Managers — June 26 - July 16, 2015 — 7B
www.marejournal.com
M id A tlantic
C ontractors & S ubcontractors By John Petriello, Ehrlich, Petriello, Gudin & Plaza A residential construction lien trap
I
nmany instances, a home- owner will not make pay- ments to a contractor,
has demonstrated a valid lien, and establish the amount of the lien. This is done either by submission of documents, or an arbitration hearing. The homeowner has the right to object and raise set-offs or counterclaims. In the case to which I refer, the contractor asserted a lien in the amount of $185,000. The homeowner objected, raising a set-off for work not done or not done correctly. However, the home- owner did not seek or prove any specific amount for his claims. The arbitrator found that a
valid lien existed for my client in the amount of $148,000. However she could not deter- mine the liquidated amount of the set-off alleged by the homeowner. The arbitrator invoked N.J.S.A. 2A:44A-21 (b) (5), which allows the arbitra- tor to order the contractor to post a “bond, letter of credit or funds” with an attorney-at-law of New Jersey in an amount the arbitrator determines to be 110% of the “approximate fair and reasonable value” of any set-offs or counterclaims raised against the lien claimant. The arbitrator ordered the
contractor to post $54,000 in cash, bond or letter of credit to satisfy this provision. This decision resulted in the contractor having to put up an additional $54,000 in addition to suffering a loss of $148,000 by reason of the homeowner not making payment for work which the arbitrator found was legitimately due my client. As my client could not post $54,000 he was not able to file a construction lien and lost the benefits which he would have enjoyed by the filing of a lien. This result is fundamen- tally unfair to a contractor. The
New Jersey Construction Lien Law was enacted to protect a contractor, not to make en- forcement of a claim difficult, if not impossible. I strongly recommend you consider this potential trap before you start the lien process. John Petriello is a part- ner at Ehrlich, Petriello, Gudin & Plaza. He has con- centrated his practice in civil commercial litigation for over 30 years, in trial and appellate matters in state and federal matters in New Jersey and New York. n
alleging the work was not p e r f o rme d or not per- formed prop- erly. The best remedy for a contractor is to file a con- s t r u c t i o n
John Petriello
lien on the homeowner’s prop- erty. A construction lien will secure the amount due a con- tractor until the resolution of any dispute. However, a recent case, in which I represented a contractor who was clearly entitled to payment, raised the fundamental unfairness of a provision of New Jersey’s Construction Lien Law. This provision prevented enforce- ment of a valid lien. Filing a residential construc- tion lien is a three step process. First, the contractor must file a Notice of Unpaid Balance. Next, the contractor must file a demand for arbitration with the American Arbitra- tion Association (“AAA”). The AAA is mandated by statute to determine if the contractor National Safety Conference selects Pittsburgh as host PITTSBURGH, PA — Con- struction safety and health professionals from across the country are coming to Pitts- burgh this summer for an an- nual conference. The Associ- ated General Contractors of America (AGC) 2015 Annual Safety & Health Committee Conference takes place at the Pittsburgh Marriott City Cen- ter on July 8-10, 2015, with an evening reception being held at PNC Park during a Pittsburgh Pirates baseball game. The Master Builders’ As- sociation and the Construc- tors Association of Western Pennsylvania will co-host the AGC 2015 Safety & Health Committee Conference, which unites construction industry professionals to participate in the development of regulatory and legislative activity on both a national and local level. The conference showcases new safety training programs and products and attendees receive updates on the latest initiatives from Occupational Safety & Health Administration (OSHA) and other industry experts. n
LAW OFFICES EHRLICH,PETRIELLO, GUDIN & PLAZA A Professional Corporation
represented owners, managers and developers for over 40 years in all aspects of real estate matters including:
We invite you to call Bruce E. Gudin, Esq. at 973-643-0040 Ext.104 to discuss your next matter. Visit our website at www.epgp-law.com.
• Landlord/Tenant • Land Development • Tax Abatements & Appeals • Real Estate Litigation • Municipal Court Building/Housing Code Violations Representation • Partnership/Corporation/LLC Arrangements • Construction and Architect Contracts • Closings • Construction and Lien Claim Litigation • Tax Free Exchanges and Tax Planning • DCA Violation Representation
LAW OFFICES EHRLICH,PETRIELLO, GUDIN & PLAZA A Professional Corporation
60 Park Place Suite 1016
555 Fifth Avenue
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Newark, NJ 07102 973-643-0040
New York, NY 10017
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