How do I contest a construction lien that was placed on my residential property?
Full Question:
Answer:
A construction lien is a claim for payment recorded against real estate for
the price of labor or materials used to improve the property. A construction
lien, also called a mechanic's lien, provides a way for a contractor to get paid
by forcing the sale of the property subject to the lien.
An enforceable written contract is a prerequisite to the filing of a valid lien
claim. Without a residential construction contract between the owner and
the prime contractor, a lien is void. The Construction Lien Law provides no
remedy for unwritten contracts. In the absence of an enforceable written
contract to support the claim, no construction lien should be recorded. A
subcontractor or supplier who claims a lien must also have an enforceable
written contract for the services or supplies which are the subject of the
claim.
A lawsuit to enforce a lien can be filed up to one year from the date of the
last provision of work, services, material or equipment, payment for which
the lien claim was filed, or within 30 days following the receipt of written
notice, by personal service or certified mail, return receipt requested, from
the homeowner requiring the claimant to start suit to establish the lien claim.
If the lawsuit is not started within either of these time frames, the claimant
must immediately discharge the lien of record in the office of the county
clerk.
At some point in time, a homeowner or a purchaser of a home may reach a
stage where a dispute with the contractor cannot be solved through
negotiations. The homeowner, whether it involves the purchase of a new
home or renovations to an existing home, may then be required or need to
use outside assistance in resolving the dispute. The most common forms of
outside assistance are the court system, arbitration or mediation. As an
example, on new home construction disputes, a homeowner has the option
of using the arbitration process under the Home Warranty or using the court
system. Similarly, in disputes involving residential construction liens, there is
a required arbitration proceeding administered by the American Arbitration
Association.
How can I resolve disputes with my contractor?
First, you should talk directly with the contractor to try to settle your
disagreements. If that doesn't work, your dispute can be settled by
arbitration or by mediation or in the courts.
How do I know which method to use in settling my dispute?
In certain types of disputes such as residential construction liens and
homeowner new home warranty claims, the statutes will require that a
particular method be used. Otherwise, the contract may describe the
method that must be used. If the contract does not require use of the
courts or arbitration and the dispute is not controlled by a statute, the court
system would be the method of resolving the dispute.
What is arbitration?
Arbitration is a process in which the parties present their positions regarding
the dispute to at least one neutral third person who will make a decision
based on the merits of each party's position. That decision is usually final
and binding, meaning that there is no right of appeal from an arbitration
decision. An advantage of arbitration is that it should be quicker and less
formal than using the courts. A second advantage is that the parties will
select the arbitrator, who will often have experience in the types of
problems that would be raised. The disadvantages of arbitration are that the
award by the arbitrator usually cannot be appealed and the parties must pay
for the arbitrator's time.
How can I get my dispute arbitrated?
Arbitration has been discussed in this pamphlet in connection with warranty
claims and lien claims. Arbitration may also be called for in your written
agreement with your contractor. Or, you and the contractor can agree after
a dispute has arisen to have it decided by arbitration. Arbitration
organizations and individual arbitrators advertise and are listed in business
directories.
What is mediation?
Mediation is a process in which an impartial third party - the mediator -
meets with the parties in an effort to help them reach a mutually acceptable
settlement of their dispute. The mediator does not make a decision about
the outcome of the dispute. Instead, the mediator assists the parties in
developing a solution to the dispute. Advantages of mediation are that it
may be less adversarial, is quick and less expensive, is less formal, may be
more flexible, and permits the parties to arrive at solutions that may not be
possible in arbitration or in court. Another advantage of mediation is that if
the parties do not reach an agreement, they will still have the opportunity to
have their disputes heard and resolved in either arbitration or court. A
disadvantage of mediation is that the parties must pay for the mediator's
time. Also, mediation requires both sides to agree and neither side can be
forced to agree to any particular settlement. Mediation organizations and
individual mediators can also be found listed in business directories.
How does use of the courts differ from arbitration or mediation?
You are entitled to use the court system to resolve your disputes with the
contractor/builder. Depending on the monetary value of your claim, you
may use the Small Claims Court, the Special Civil Part of the Law Division of
the Superior Court or the regular Law Division of the Superior Court. Your
claim would be started by the filing of a Complaint or, if the
contractor/builder has filed a Complaint, you would need to file an Answer.
At your county courthouse, you will find much free information to help you
decide whether and how to get your dispute to court. In general, how you
proceed depends on the amount of money in dispute. For smaller,
uncomplicated disputes you may decide that you can manage in Small
Claims Court or in Special Civil Part on your own. The advantages of use of
the court system is that other than the filing fee and attorney's fees if you
have employed an attorney, you do not pay for the time of the judge. The
decision by the judge, or jury, is enforceable without seeking or starting a
separate lawsuit to enforce a judgment and if you are dissatisfied with the
decision of the judge or jury, you will have a right to appeal. Some
disadvantages of using the courts are that it can often be a longer process
than using arbitration and it is much more formal which may require your
hiring a lawyer to assist you in meeting the court requirements.
