ASSEMBLY, No. 1034
STATE OF NEW JERSEY
Introduced Pending Technical Review by Legislative Counsel
PRE-FILED FOR INTRODUCTION IN THE 1996 SESSION
By Assemblymen DiGAETANO and DORIA
An Act concerning certain types of liens and amending various parts of the statutory law.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. N.J.S.2A:44-128 is amended to read as follows:
2A:44-128. a. Any person who, as laborer, mechanic, materialman, merchant or trader, or subcontractor, in pursuance of or conformity with the terms of any contract for any public improvement made between any person and a public agency as defined in [section] N.J.S.2A:44-126 [of this title] and authorized by law to make contracts for the making of public improvements, performs any labor or furnishes any materials, including the furnishing of oil, gasoline or lubricants and vehicle use, toward the performance or completion of any such contract, shall, on complying with the provisions of [sections] subsection b. of N.J.S.2A:44-128, N.J.S.2A:44-132 and N.J.S.2A:44-133 [of this title], have a lien for the value of the labor or materials, or both, upon the moneys due or to grow due under the contract and in the control of the public agency, to the full value of the claim or demand. The lien may be filed and, to the extent of the amount due or to grow due under the contract, shall become an absolute lien to the full value of the labor performed or materials furnished in favor of every person and his representatives and assigns employed by or furnishing materials to the contractor or subcontractor.
No public agency shall be required to pay a greater amount than the contract price of the labor performed and materials furnished or the value thereof when no specific contract is made with respect to the same by the contractor or subcontractor, respectively.
b. Any person who may seek to assert a lien under subsection a. of this section shall, within 20 days of the first performance of work or performance of work or delivery of labor or materials to a subcontractor, provide to the contractor written notice that he or she has furnished labor or materials to the subcontractor. The notice shall contain the name, address and telephone number of the person providing the labor or materials, the name and geographical location of the public improvement for which the labor or materials have been supplied, the name of the subcontractor to which the labor or materials have been supplied, a description of the labor or materials supplied, and the date that the labor or materials were first supplied to the subcontractor. The provision of this written notice to the contractor within 20 days of the first performance of work or delivery of labor or materials to the subcontractor shall be a requirement for, and shall be a condition of, the securing of a lien by the person supplying the labor or materials.
Written notice to the contractor shall be substantially in the following form:
NOTICE TO CONTRACTOR OF THE DELIVERY OF LABOR OR
MATERIALS
In accordance with the terms and provisions of the "Municipal Mechanics' Lien Law," N.J.S.2A:44-125 et seq., notice is hereby given that:
1. (Name of person supplying labor or materials) of (address of person supplying labor or materials) has on (date) provided to (name of subcontractor) the following: (description of labor or materials). My telephone number is (telephone number of person supplying labor or materials).
2. The (description of labor or materials) were provided for the (name of public improvement) in (name of municipality), New Jersey.
Signed:
For:
Individual, firm or corporation
c. Funds received by a contractor and paid to a subcontractor or supplier for work performed or labor or materials supplied pursuant to a contract for any public improvement shall be applied only to amounts due and owing for work performed or labor or materials supplied for such public improvement. Any supplier who knowingly applies such payment received from the contractor on the public improvement to amounts due and owing for work performed or labor or materials supplied on a construction project other than the public improvement and then claims a lien on the public improvement for non-payment shall forfeit all lien rights under this title. A supplier forfeiting his lien rights pursuant to this section shall be liable for all damages incurred by any contractor as a result of the misapplication of such funds, including attorney's fees, and shall be liable for all court costs and reasonable legal expenses, including attorneys' fees, incurred by the contractor in defending or causing the discharge of the lien claim.
(cf: N.J.S.2A:44-128)
2. N.J.S.2A:44-143 is amended to read as follows:
2A:44-143. a. When public buildings or other public works or improvements are about to be constructed, erected, altered or repaired under contract, at the expense of the State or any county, municipality or school district thereof, the board, officer or agent contracting on behalf of the State, county, municipality or school district, shall require the [usual] delivery of a surety performance bond and payment bond issued in accordance with N.J.S.2A:44-147 and otherwise, as provided for by law, with good and sufficient sureties[, with an additional obligation]. It shall be the obligation of the payment bond for the payment by the contractor[, and by all subcontractors,]for all labor performed or materials, provisions, provender or other supplies, teams, fuels, oils, implements or machinery used or consumed in, upon, for or about the construction, erection, alteration or repair of such buildings, works or improvements provided by subcontractors or material suppliers in contract with the contractor, or subcontractors in contract with a subcontractor or material supplier to the contractor, or material suppliers to a contractor, which class of persons shall be the beneficiaries of such surety bond.
b. When such contract is to be performed at the expense of the State and is entered into by the Director of the Division of Building and Construction or State departments designated by the Director of the Division of Building and Construction, the director or the State departments may: (1) establish for that contract the amount of the bond at any percentage, not exceeding 100%, of the amount bid, based upon the director's or department's assessment of the risk presented to the State by the type of contract and other relevant factors, and: (2) waive the bond requirement of this section entirely if the contract is for a sum not exceeding $200,000.
c. When such a contract is to be performed at the expense of a county, municipality or school district, the board, officer or agent contracting on behalf of the county, municipality or school district may: (1) establish for that contract the amount of the bond at any percentage, not exceeding 100%, of the amount bid, based upon the board's, officer's or agent's assessment of the risk presented to the county, municipality or school district by the type of contract and other relevant factors, and (2) waive the bond requirement of this section entirely if the contract is for a sum not exceeding $100,000.
d. A surety's obligation shall not extend to any claim for damages based upon alleged negligence that resulted in personal injury, wrongful death, or damage to real or personal property, and no bond shall in any way be construed as a liability insurance policy. Nothing herein shall relieve the surety's obligation to guarantee the contractor's performance of all conditions of the contract, including the maintenance of liability insurance if and as required by the contract. Only the obligee named on the bond, and any subcontractor performing labor or any subcontractor or materialman providing materials for the construction, erection, alteration or repair of the public building, work or improvement for which the bond is required pursuant to this section, shall have any claim against the surety under the bond.
(cf: P.L.1995, c.38, s.2)
3. N.J.S.2A:44-144 is amended to read as follows:
2A:44-144. The bond required by this article shall be executed by the contractor with such sureties in accordance with N.J.S.2A:44-147 as shall be approved by the board, officer or agent acting on behalf of the state, county, municipality or school district, in an amount equal to [at least] 100 per cent of the contract price[, and]. The payment bond shall be conditioned for the payment by the contractor[, and by all subcontractors, or his or their subcontractor,]of all indebtedness which may accrue to any person, firm or corporation designated as a "beneficiary" pursuant to N.J.S.2A:44-143, in an amount not exceeding the sum specified in the bond, on account of any labor performed or materials, provisions, provender or other supplies, or teams, fuels, oils, implements or machinery used or consumed in, upon, for or about the construction, erection, alteration or repair of the public building or public work or improvement.
The payment bond shall be deposited with and be held by the board, officer or agent acting on behalf of the state, county, municipality or school district, for the use of [any party interested therein] any beneficiary thereof.
(cf: N.J.S.2A:44-144)
4. N.J.S.2A:44-145 is amended to read as follows:
2A:44-145. Any person who may be a beneficiary of the payment bond, as defined in this article, and who does not have a direct contract with the contractor furnishing the bond shall, prior to commencing any work, provide written notice to the contractor by certified mail or otherwise, provided that he shall have proof of delivery of same, that said person is a beneficiary of the bond. If a beneficiary fails to provide the required written notice, the beneficiary shall not have any rights to the benefits otherwise available hereunder.
Any [person] beneficiary, as defined in N.J.S.2A:44-143, to whom any money shall be due on account of having performed any labor or furnished any materials, provisions, provender or other supplies, or teams, fuels, oils, implements or machinery in, upon, for or about the construction, erection, alteration or repair of any public building or other public work or improvement, shall, at any time before the [acceptance of such building, work or improvement by the duly authorized board or officer, or within 80 days thereafter] expiration of one year from the last date upon which such beneficiary shall have performed actual work or delivered materials to the project, in the case of a material supplier, furnish the sureties on the bond required by this article a statement of the amount due to him.
No action shall be brought against any of the sureties on the bond required by this article until the expiration of [80] 90 days after [the acceptance of the building, work or improvement by the duly authorized board or officer] provision to the sureties and the contractor of the statement of the amount due to him, but in no event later than one year from the last date upon which such beneficiary shall have performed actual work or delivered materials to the project.
(cf: N.J.S.2A:44-145)
5. N.J.S.2A:44-146 is amended to read as follows:
2A:44-146. If the indebtedness due to any person as shown by the statement required to be filed by [section] N.J.S.2A:44-145 [of this title] shall not be paid in full at the expiration of [80] 90 days from the [acceptance of the building, work or improvement by the duly authorized board or officer] date of notice of the amount due to the person, such person [may] shall, within 1 year from the [date of such acceptance] last date that work was performed or materials were supplied by that person, bring an action in his own name upon the bond required by this article.
(cf: N.J.S.2A:44-146)
6. N.J.S.2A:44-147 is amended to read as follows:
2A:44-147. The bond required by this article shall be in substantially the following form:
"Know all men by these presents, that we, the undersigned as principal and as sureties, are hereby held and firmly bound unto in the penal sum of dollars, for the payment of which well and truly to be made, we hereby jointly and severally bind ourselves, our heirs, executors, administrators, successors and assigns.
"Signed this day of , 19 .
"The condition of the above obligation is such that whereas, the above named principal did on the day of , 19 , enter into a contract with , which said contract is made a part of this the bond the same as though set forth herein;
"Now, if the said shall well and faithfully do and perform the things agreed by to be done and performed according to the terms of said contract, and shall pay all lawful claims of [subcontractors, materialmen, laborers, persons, firms or corporations] beneficiaries as defined by N.J.S.2A:44-143 for labor performed or materials, provisions, provender or other supplies or teams, fuels, oils, implements or machinery furnished, used or consumed in the carrying forward, performing or completing of said contract, we agreeing and assenting that this undertaking shall be for the benefit of any [subcontractor, materialman, laborer, person, firm or corporation] beneficiary as defined in N.J.S.2A:44-143 having a just claim, as well as for the obligee herein; then this obligation shall be void; otherwise the same shall remain in full force and effect; it being expressly understood and agreed that the liability of the surety for any and all claims hereunder shall in no event exceed the penal amount of this obligation as herein stated.
"The said surety hereby stipulates and agrees that no modifications, omissions or additions in or to the terms of the said contract or in or to the plans or specifications therefor shall in anywise affect the obligation of said surety on its bond."
Recovery of any claimant under the bond shall be subject to the conditions and provisions of this article to the same extent as if such conditions and provisions were fully incorporated in the form set forth above.
(cf: N.J.S.2A:44-147)
7. This act shall take effect on the 30th day next following enactment.
STATEMENT
The intent of this bill is to eliminate the problems that sometimes arise on construction sites when there are many subcontractors on a construction project.
In many cases, a general contractor will hire a subcontractor to perform certain parts of a construction job, and the subcontractor will hire a sub-subcontractor. Oftentimes, the general contractor is not aware that the sub-subcontractor has been hired and is working on the construction project. It is the responsibility of the subcontractor who employs a sub-subcontractor to pay the sub-subcontractor for work performed or materials delivered, after receiving his payment from the general contractor. If a sub-subcontractor does not receive payment, a lien is usually filed by him against the contractor, or against the bond or bonds posted by the general contractor.
In order to eliminate the potential for confusion in such cases, the bill requires that any subcontractor, or any laborer, mechanic, materialman, merchant or trader, seeking to assert a lien for payment due, must within 20 days of the first performance of work or delivery of labor or materials to a subcontractor, provide to the contractor written notice that he or she has furnished labor or materials to the subcontractor. The notice must contain the name, address and telephone number of the person providing the labor or materials, the name and geographical location of the public improvement for which the labor or materials have been supplied, the name of the subcontractor to which the labor or materials have been supplied, a description of the labor or materials supplied, and the date that the labor or materials were first supplied to the subcontractor. If no such notice is given, a lien cannot be secured.
The bill also requires that funds received by a contractor and paid to a subcontractor or supplier for work performed or labor or materials supplied pursuant to a contract for any public improvement shall be applied only to amounts due and owing for work performed or labor or materials supplied for such public improvement. Any supplier who knowingly applies such payment received from the contractor on the public improvement to amounts due and owing for work performed or labor or materials supplied on a construction project other than the public improvement and then claims a lien on the public improvement for non-payment shall forfeit all lien rights under this title. A supplier forfeiting his lien rights pursuant to this section shall be liable for all damages incurred by any contractor as a result of the misapplication of such funds, including attorney's fees, and shall be liable for all court costs and reasonable legal expenses, including attorneys' fees, incurred by the contractor in defending or causing the discharge of the lien claim.
Revises certain aspects of "Municipal Mechanics' Lien Law."