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Can a subcontractor demand payment over and above agreed original bid if all payments were made in accordance with the original bid?

I have a subcontractor who bid an amount to work on a residential renovation. After beginning work, 6 weeks later, he stated that he underbid the job, and "revised" his initial bid to 2.5x the amount in a text message. I requested a meet to discuss this matter, but he did not meet with me until after the original agreed amount was paid in full, and over 90 days after saying he under bid. I never agreed to his revised bid, but was willing to discuss it. Furthermore, he is now requesting payment for items he states were "extra," but at no time during work indicated the items were extra, presented a price for those items, received approval or billed or provided any change orders. He is now demanding payment and threatening a mechanics lein for these extras. I am an honest person, and feel I am being taken advantage of. Does he have a case?

1 reply

Jul 1, 2019

That's a good question, and I'm sorry to hear your sub is causing trouble on this job. First, let's look at whether a claimant can unilaterally change their bid after entering into a contract. After, let's look at what amounts can be included in a New Jersey mechanics lien filing, then look at the notice requirements that must be met before a claimant can file a valid and enforceable New Jersey mechanics lien. Then, we can address what tools might be available to fend off a lien claim.

Once a contract is entered into, a subcontractor cannot change their price unilaterally. That is, they are not able to pick a new contract price and institute it after their customer has already agreed to a different price. Now, if there are serious issues with an original bid due to circumstances outside of the subcontractor's control, or due to circumstances the sub couldn't have been aware of at the time the contract was signed, then it might be possible to invalidate that original contract and/or work to have it reformed. But again - a sub can't just increase their price when they've agreed to a contract and the contract doesn't allow them to reformulate the price. In a situation where a subcontractor woefully underbid a project and their customer knows that the sub isn't getting a fair price, it might be worth considering paying that sub more than the contract amount in order to promote fairness and to keep that relationship intact. But the customer isn't required to pay above and beyond what's due.

Regarding the ability to file a lien... In New Jersey, a mechanics lien is limited to the amount of the construction contract that's gone unpaid. § 2A: 44A-3 and § 2A: 44A-9 of New Jersey's lien statute specifically ties the ability to lien to the amount of the contract price. So, in a situation where no change orders have inflated the amount of what's due under the contract, a claimant cannot file a valid and enforceable mechanics lien on the project. So, if a claimant is threatening to file a lien claim that exceeds what's owed under contract or what's owed pursuant to valid change orders, keep in mind that they should not be able to successfully pursue a lien claim.

Further, there are strict requirements that a claimant must follow in order to file a mechanics lien on residential property in New Jersey. The cost and time frame of this process, coupled with the fact that the claim will be evaluated before it can be filed against the property, should help to fend off lien claims. You can learn more about that process from top to bottom, here: New Jersey Residential Mechanics Lien: A Convoluted Process.

The second part of the New Jersey residential mechanics lien process is a strong tool in fighting off improper mechanics lien claims. Once a Notice of Unpaid Balance is filed, the next part of a lien claimant's process is to send an Arbitration Demand. When this Arbitration Demand is sent, the lien claimant sends documentation - like the contract, invoices, change orders, and other relevant information - in order to establish that they are, in fact, entitled to lien rights against the project. And, the other side of the dispute is entitled to provide information countering what the lien claimant puts forward. So, before a lien claimant can even try to attach their lien to a New Jersey residential property, that claimant must, in essence, prove that their claim has some basis. And, if the other side to the dispute can clearly show that the claim is bogus, the claim can be extinguished before it can even be filed. And to be sure, the New Jersey lien statute (specifically at § 2A: 44A-5) strictly prohibits the ability to file a residential lien claim unless the correct process if followed.

Regarding how best to fend off a prospective lien claim...
Maintaining organized and detailed files about what was owed and what was paid is an important first step in a construction payment dispute. Because New Jersey residential lien claims require that arbitration be undertaken, it's especially important. By showing that a lien claim is not proper at that stage, the filing of a lien can be prevented before it even happens, unlike other states. Further, explaining to the lien claimant why their claim won't be successful and threatening to take preemptive legal action - even with something as a demand letter - could help dissuade a claimant from moving forward with their claim.

I hope this information was helpful! Here are some other resources that might be valuable:
(1) New Jersey Mechanics Lien Overview
(2) What if There’s a Mistake in a Construction Contract? | Mistake Doctrine.

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