SENATE COMMERCE COMMITTEE

 

STATEMENT TO

 

SENATE, No. 834

 

with committee amendments

 

STATE OF NEW JERSEY

 

DATED: JUNE 3, 1996

 

      The Senate Commerce Committee reports favorably and with committee amendments Senate Bill No. 834.

      This bill, as amended by the committee, modifies the "Municipal Mechanics' Lien Law" in regard to "sub-subcontractors."

      This 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 materials to a public improvement, file with the municipal clerk, the chief financial officer of the county or the chairman of the commission, board or authority, whichever is appropriate, written notice that he has furnished labor or materials to a subcontractor on the project. 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 a notice is filed after the 20-day period, the person so filing may assert a lien for any labor or materials provided on or after that filing date. The bill, as introduced by the sponsor, provided that the required notice was to be provided to the contractor. The committee amendments delete that requirement and provide for filing with a public official so that the filings will be public records.

      The officer of the public agency with whom these notices are to be filed must maintain a separate file for the notices and the file must be available to the public for inspection and copying during regular business hours.

      Failure to provide the required notice will be a bar to secure a lien for labor or materials provided, unless there is money owing from the contractor to the subcontractor to whom the labor or materials were provided. In this case, the lien is limited in value to an amount not greater than the money owing from the contractor to the subcontractor.

      Under the bill as amended, a subcontractor or supplier who knowingly applies payment received from a contractor on a public improvement to amounts due and owing for work performed or labor or materials supplied on a construction project, other than that public improvement, and then claims a lien against the public improvement for non-payment, will forfeit all lien rights under the "Municipal Mechanics' Lien Law" and be liable for all damages incurred by a contractor as a result of the misapplication of the funds, including attorney fees, and be liable for all court costs and reasonable legal expenses, including attorney fees, incurred by the contractor in defending or causing discharge of the lien claim. Under the bill introduced by the sponsor, this forfeiture of lien rights and liability for monetary amounts applied only to a supplier.

      The bill clarifies that a payment and performance bond shall have an obligation for the performance of the contract as well as payment by the contractor for labor and materials used in the work contracted for. The bill requires a person who is a beneficiary of the payment bond and who does not have a direct contract with the contractor furnishing the bond to provide written notice to the contractor prior to commencing any work. If the notice is provided after commencing work, the benefits available will only apply from the date the notice is provided.