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NJSA 2A:44A-21 Legislative Findings, Additional Requirements for Filing of Lien on Residential Construction

2A:44A-21. Legislative findings, additional requirements for filing of lien on residential construction

21. a. The Legislature finds that the ability to sell and purchase residential housing is essential for the preservation and enhancement of the economy of the State of New Jersey and that while there exists a need to provide contractors, subcontractors and suppliers with statutory benefits to enhance the collection of money for goods, services and materials provided for the construction of residential housing in the State of New Jersey, the ability to have a stable marketplace in which families can acquire homes without undue delay and uncertainty and the corresponding need of lending institutions in the State of New Jersey to conduct their business in a stable environment and to lend money for the purchase or finance of home construction or renovations requires that certain statutory provisions as related to the lien benefits accorded to contractors, subcontractors and suppliers be modified. The Legislature further finds that the construction of residential housing generally involves numerous subcontractors and suppliers to complete one unit of housing and that the multiplicity of lien claims and potential for minor monetary disputes poses a serious impediment to the ability to transfer title to residential real estate expeditiously. The Legislature further finds that the purchase of a home is generally one of the largest expenditures that a family or person will make and that there are a multitude of other State and federal statutes and regulations, including the "New Home Warranty and Builders Registration Act," P.L.1977, c.467 (C.46:3B-1 et seq.) and "The Planned Real Estate Development Full Disclosure Act," P.L.1977, c.419 (C.45:22A-21 et seq.), which afford protection to consumers in the purchase and finance of their homes, thereby necessitating a different treatment of residential real estate as it relates to the rights of contractors, suppliers and subcontractors to place liens on residential real estate. The Legislature declares that separate provisions concerning residential construction will provide a system for balancing the competing interests of protecting consumers in the purchase of homes and the contract rights of contractors, suppliers and subcontractors to obtain payment for goods and services provided. 

b. The filing of a lien for work, services, material or equipment furnished pursuant to a residential construction contract shall be subject to the following additional requirements: 

(1) As a condition precedent to the filing of any lien arising under a residential construction contract, a lien claimant shall first file a Notice of Unpaid Balance and Right to File Lien in accordance with the provisions of subsection a. of section 20 of this act, and comply with all other provisions of this section. 

(2) Upon the filing of a Notice of Unpaid Balance and Right to File Lien, service of the Notice of Unpaid Balance and Right to File Lien shall be effected in accordance with the provisions of section 7 of this act. 

(3) Unless the parties have otherwise agreed in writing to an alternative dispute resolution mechanism, simultaneously with the service under paragraph (2) of this subsection, the lien claimant shall also serve a demand for arbitration and fulfill all the requirements and procedures of the American Arbitration Association to institute an expedited proceeding before a single arbitrator designated by the American Arbitration Association. 

(4) Upon the closing of all hearings in the arbitration, the arbitrator shall make the following determinations: (a) whether the Notice of Unpaid Balance and Right to File Lien was in compliance with section 20 of this act and whether service was proper under section 7 of this act; (b) the validity and amount of any lien claim which may be filed pursuant to the Notice of Unpaid Balance and Right to File Lien; (c) the validity and amount of any liquidated or unliquidated setoffs or counterclaims to any lien claim which may be filed; and (d) the allocation of costs of the arbitration among the parties. 

(5) In the event the amount of any setoffs or counterclaims presented in the arbitration are unliquidated and cannot be determined by the arbitrator in a liquidated amount, the arbitrator, as a condition precedent to the filing of the lien claim, shall order the lien claimant to post a bond, letter of credit or funds with an attorney-at-law of New Jersey, or other such person or entity as may be ordered by the arbitrator in such amount as the arbitrator shall determine to be 110% of the approximate fair and reasonable value of such setoffs or counterclaims, but in no event shall the bond, letter of credit or funds exceed the amount of the lien claim which may be filed. This 110% limitation regarding any bond, letter of credit or funds shall also apply to any alternative dispute resolution mechanism to which the parties may agree. 

(6) The arbitrator shall make such determinations set forth in paragraphs (4) and (5) of this subsection within 30 days of receipt of the lien claimants demand for arbitration by the American Arbitration Association. That time period shall not be extended unless otherwise agreed to by the parties. If an alternative dispute mechanism is alternatively agreed to between the parties, such determination shall be made as promptly as possible making due allowance for all time limits and procedures set forth in this act.

(7) Any contractor, subcontractor or supplier whose interests are affected by the filing of a Notice of Unpaid Balance and Right to File Lien under section 10 of this act shall be permitted to join in such arbitration; but the arbitrator shall not determine the rights or obligations of any such parties except to the extent those rights or obligations are affected by the lien claimants Notice of Unpaid Balance and Right to File Lien. 

(8) Upon determination by the arbitrator that there is an amount which, pursuant to a valid lien shall attach to the improvement, the lien claimant shall, within 10 days of the lien claimants receipt of the determination, file such lien claim in accordance with the provisions of section 8 of this act and furnish any bond, letter of credit or funds required by the arbitrators decision. The failure to file such a lien claim, or furnish the bond, letter of credit or funds, within the 10-day period, shall cause any lien claim to be invalid. 

(9) Except for the arbitrators determination itself, any such determination shall not be considered final in any legal action or proceeding, and shall not be used for purposes of collateral estoppel, res judicata, or law of the case to the extent applicable. Any finding of the arbitrator pursuant to the provisions of this act shall not be admissible for any purpose in any other action or proceeding. 

(10) If either the lien claimant or the owner is aggrieved by the arbitrators determination, then either party may institute a summary action in the Superior Court, Law Division, for the vacation, modification or correction of the arbitrators determination. The arbitrators determination shall be confirmed unless it is vacated, modified or corrected by the court. The court shall render its decision after giving due regard to the time limits and procedures set forth in this act. 

(11) In the event a Notice of Unpaid Balance and Right to File Lien is filed and the owner conveys its interest in real property to another person before a lien claim is filed, then prior to or at the time of conveyance, the owner may make a deposit with the county clerk where the improvement is located, in an amount no less than the amount set forth in the Notice of Unpaid Balance and Right to File Lien. For any deposit made with the county clerk, the county clerk shall discharge the Notice of Unpaid Balance and Right to File Lien or any related lien claim against the real property for which the deposit has been made. After the issuance of the arbitrators determination set forth in paragraphs (4) and (5) of this subsection, any amount in excess of that determined by the arbitrator to be the amount of a valid lien claim shall be returned forthwith to the owner who has made the deposit. The balance shall remain where deposited unless the lien claim has been otherwise paid, satisfied by the parties, forfeited by the claimant, invalidated pursuant to paragraph (8) of this subsection or discharged under section 33 of this act. Notice shall be given by the owner in writing to the lien claimant within five days of making the deposit. 

(12) Solely for those lien claims arising from a residential construction contract, if a Notice of Unpaid Balance and Right to File Lien is determined to be without basis, the amount of the Notice of Unpaid Balance and Right to File Lien is significantly overstated, or the Notice of Unpaid Balance and Right to File Lien is not filed in substantially the form, or in the manner, or at a time not in accordance with the provisions of this act, then the claimant shall be liable for all damages suffered by the owner or any other party adversely affected by the Notice of Unpaid Balance and Right to File Lien, including all court costs, reasonable attorneys fees and legal expenses incurred. 

(13) If the aggregate sum of all lien claims attaching to any real property that is the subject of a residential construction contract exceeds the amount due under a residential purchase agreement, less the amount due under any previously recorded mortgages or liens other than construction liens, then upon entry of judgment of all such lien claims, each lien claim shall be reduced pro rata. Each lien claimants share then due shall be equal to the monetary amount of the lien claim multiplied by a fraction in which the denominator is the total monetary amount of all valid claims on the owners interest in real property against which judgment has been entered, and the numerator is the amount of each particular lien claim for which judgment has been entered. The amount due under the residential purchase agreement shall be the net proceeds of the amount paid less previously recorded mortgages and liens other than construction liens and any required recording fees.

Kenneth Vercammen was the Middlesex County Bar Municipal Court Attorney of the Year

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Kenneth Vercammen is the Managing Attorney at Kenneth Vercammen & Associates in Edison, NJ. He is a New Jersey trial attorney has devoted a substantial portion of his professional time to the preparation and trial of litigated matters. He has appeared in Courts throughout New Jersey each week for litigation and contested Probate hearings.

Mr. Vercammen has published over 125 legal articles in national and New Jersey publications on elder law, probate and litigation topics. He is a highly regarded lecturer on litigation issues for the American Bar Association, NJ ICLE, New Jersey State Bar Association and Middlesex County Bar Association. His articles have been published in noted publications included New Jersey Law Journal, ABA Law Practice Management Magazine, and New Jersey Lawyer.

He is chair of the Elder Law Committee of the American Bar Association General Practice Division. He is also Editor of the ABA Estate Planning Probate Committee Newsletter and also the Criminal Law Committee newsletter. Mr. Vercammen is a recipient of the NJSBA- YLD Service to the Bar Award. And past Winner "General Practice Attorney of the Year" from the NJ State Bar Association. He is a 22 year active member of the American Bar Association. He is also a member of the ABA Real Property, Probate & Trust Section.

He established the NJlaws website which includes many articles on Elder Law. Mr. Vercammen received his B.S., cum laude, from the University of Scranton and his J.D. from Widener/Delaware Law School, where he was the Case Note Editor of the Delaware Law Forum, a member of the Law Review and the winner of the Delaware Trial Competition.


Edison Adult School -Wills, Elder Law & Probate- 2007, 2006, 2005, 2004, 2003, 2002 [inc Edison TV], 2001, 2000,1999,1998,1997
Nuts & Bolts of Elder Law - NJ Institute for Continuing Legal Education/ NJ State Bar ICLE/NJSBA 2008, 2007, 2006, 2005, 2004, 2003, 2002, 2000, 1999, 1996
Elder Law and Estate Planning- American Bar Association Miami 2007
Elder Law Practice, New Ethical Ideas to Improve Your Practice by Giving Clients What They Want and Need American Bar Association Hawaii 2006
South Plainfield Seniors- New Probate Law 2005, East Brunswick Seniors- New Probate Law 2005
Old Bridge AARP 2002; Guardian Angeles/ Edison 2002; St. Cecilia/ Woodbridge Seniors 2002;
East Brunswick/ Halls Corner 2002;
Linden AARP 2002
Woodbridge Adult School -Wills and Estate Administration -2001, 2000, 1999, 1998, 1997, 1996
Woodbridge Housing 2001; Metuchen Seniors & Metuchen TV 2001; Frigidare/ Local 401 Edison 2001; Chelsea/ East Brunswick 2001, Village Court/ Edison 2001; Old Bridge Rotary 2001; Sacred Heart/ South Amboy 2001; Livingston Manor/ New Brunswick 2001; Sunrise East Brunswick 2001; Strawberry Hill/ Woodbridge 2001;
Wills and Elder Law - Metuchen Adult School 1999,1997,1996,1995,1994,1993
Clara Barton Senior Citizens- Wills & Elder Law-Edison 2002, 1995
AARP Participating Attorney in Legal Plan for NJ AARP members 1999-2005

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