A construction contract doesn’t just cover the scope of work and price. It also shapes your legal rights in the event of payment disputes.
Contract language can affect your ability to place a legal claim against a property if you’re not paid. Unfortunately, many contractors unintentionally weaken or lose those rights because they don’t fully understand the clauses that impact the ability to file or enforce a lien. Therefore, it’s crucial to know which contract provisions affect your lien rights.
1. Pay-if-paid and pay-when-paid clauses
These clauses control when, or if, you get paid if you are dealing with an owner who is relying on financing for the project. The pay-if-paid clause states you will only receive payment if the owner does. This clause could eliminate your right to place a lien on the property, since your payment is contingent on someone else being paid.
If your contract has a pay-when-paid clause, the payment may be delayed, but not typically eliminated. However, this clause can shorten the timeframe you have to file a claim. You should avoid pay-if-paid clauses whenever possible. It’s also essential to ensure payment timing doesn’t push your lien deadlines so that you lose your lien rights.
2. Lien waiver clauses
Some contacts have lien waivers stating you waive lien rights even before you begin work. While New Jersey does allow these waivers, they can’t be blanket waivers. Still, they can cause major legal headaches. Watch for language like “contractor waivers all lien rights related to the project.”
3. Notice requirements
New Jersey has strict deadlines for preliminary notices and lien filings. Still, some contracts may attempt to impose shorter deadlines. Missing these deadlines can impact your ability to file a lien. Be sure to track all contractual and state notice requirements.
Your lien rights are some of the most effective tools you have to ensure you get paid for your work. Don’t let seemingly routine contract clauses weaken them. Before signing any contract, it’s best to have a legal professional review it and negotiate fairer terms.
