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Orefice v. ADR

315 N.J. Super. 493, 719 A.2d 169 (App. Div. 1998)

CONSTRUCTION LIEN LAW; ARBITRATION—A residential contractor may avail itself of a contract’s arbitration provision even if it has obtained a lien through the mandated arbitration process under the Construction Lien Law.

A contractor constructing a new residence filed a Notice of Unpaid Balance and Right to File Lien with the County Clerk and served it on the owner. Under the Construction Lien Law, that service is a condition precedent to the filing of any lien arising under a residential construction contract. Simultaneously with service on the owner, the contractor served a demand for arbitration, also in accordance with the Construction Lien Law as applied to residential construction contracts. The arbitrator found in favor of the contractor and within the required time period, the contractor filed a lien in the awarded amount with the County Clerk. The contractor took no further action for eight months, at which time it filed a demand for arbitration under a specific arbitration clause in its contract with the owner. The owner responded that the dispute was not arbitratable because the contractor had already filed a lien which could only be enforced by an action in the Superior Court. The contractor responded that it had made a choice not to enforce the lien at that time, but instead sought an award leading to judgment. The owner then commenced an action to enjoin the arbitration and the lower court decided against the owner on the basis that the use of the lien claim procedure is neither mandatory nor the exclusive remedy. In reaching that decision, the lower court judge pointed to a section of the Construction Lien Law which said that if a contractor does not seek to enforce a lien within one year, the lien is extinguished. The lower court recognized that just because the lien might lapse, does not mean that the contractor has lost the right to secure eventual recovery of the sum owned.

The Appellate Division affirmed, finding no reason in public policy or in the Act’s objectives to deny a claimant an alternate remedy. In fact, the Act expressly provides that “nothing in this Act shall be construed to limit the right of any claimant in pursuing any remedy provided by law.” It held that any disputes arising out of the improvement which is the subject of a lien claim, but which are unrelated to any action to enforce a lien claim, may be brought in a separate action. Furthermore, a section of the Act specifically authorizes the use of an “alternate dispute resolution mechanism,” if the parties so agree in writing, in lieu of the mandatory arbitration procedure in the Act. In summary, the Court perceived no obstacle in the Act to a contractor’s decision to give up the security represented by a lien and pursue other remedies.


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