New Jersey Appeals Court Clarifies Allocation of Funds Under Construction Lien
by Michael Cifelli on January 7, 2013
New Jersey’s Construction Lien Law allows a contractor or supplier who is owed payment for its work or materials to file a lien against the real property on which the improvements are constructed. The Appellate Division recently clarified how subsequent payments must be allocated under a lien.
Under existing precedent established in Craft v. Stevenson Lu
mber Yard Inc., 179 N.J. 56 (2004), a materials supplier that seeks to file a construction lien is obligated to apply payments already made by the materials purchaser, such as the project/property owner through payments to its general contractor, if the supplier has reason to know that those payments came from the building project against which the supplier seeks to file the lien. Otherwise, the supplier cannot establish the existence of the true debt and no lien may attach under the construction lien law. In turn, L&W Supply Corporation v. DeSilva specifically considered the extent of the obligation of the materials supplier "to ascertain the source of payments and to apply them accordingly."
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