Is the up-front lien waiver in our subcontract enforceable in New Jersey?
Only to the extent of payment actually received. A waiver of construction lien rights is against public policy, unlawful and void unless given in consideration for payment for the work, services, materials or equipment provided or to be provided, and even then it is effective only upon and to the extent that the payment is actually received (N.J.S.A. 2A:44A-38).
The trap
This defeats both halves of the standard contractor playbook in one sentence. A no-lien covenant given for nothing but the award of the subcontract is void; a waiver given in consideration for payment, including payment for work still to be provided, is not void, but it is worthless until paid: effective only 'upon and to the extent that such payment is actually received', so, on the section's words, a waiver is effective only to the extent of payment actually received.
4 authorities
- statuteN.J. Stat. Ann. § 2A:44A-38enactment date not established
The words that state the rule
Waivers of construction lien rights are against public policy, unlawful, and void, unless given in consideration for payment for the work, services, materials or equipment provided or to be provided, and such waivers shall be effective only upon and to the extent that such payment is actually received.
- case163 N.J. 507Thomas Group, Inc. v. Wharton Senior Citizen Housing, Inc.N.J.decided 2000read it at the source ↗
The words that state the rule
In addition, as a benefit to contractors, the Construction Lien Law codified a prohibition on waivers. Waivers had been permitted under the Mechanic’s Lien Law, and contractors often were pressured to waive their Ken rights in exchange for signing construction contracts. Under the new Construction Lien Law, waivers on construction Ken rights are deemed void and against public policy “unless given in consideration for payment for the work, services, materials, or equipment provided, and ... [are] effective only upon and to the extent that such payment is actually received.” N.J.S.A. 2A:44A-38.
- case163 N.J. 507Thomas Group, Inc. v. Wharton Senior Citizen Housing, Inc.N.J.decided 2000read it at the source ↗
The words that state the rule
The Legislature’s primary purpose in revising the Lien Law was to simplify the lien-filing process. That was accomplished by streamlining the process to eliminate the prior law’s pre-filing requirement, which had caused tension between contractors and owners, and by abolishing lien waivers, which impinged on con *517 tractors’ rights to obtain construction liens.
- case(N.J. Mar. 23, 2004)Craft v. Stevenson Lumber Yard, Inc.N.J.decided 2004
The words that state the rule
An owner also may require a contractor to obtain lien waivers from subcontractors *71 and suppliers as they are paid, N.J.S.A. 2A:44A-38, but under the CLL such waivers are not considered essential because the property is protected to the extent that payments the owner has made are subtracted from the total contract price in measuring the lien fund.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.