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When releasing a recorded Notice of Unpaid balance and Intent to lien: can you change the language or make it contingent

i am an unpaid sub on a job. Freedom Mortgage is holding a final draw on the property. i could not get homeowner to agree to pay me so i filed. now that i filed, we have agreed to paying me out of the final draw from the bank. The bank however wants me to record the NJ release of unpaid balance form BEFORE the money can be distributed to the GC/Homeowner. How can i record this BEFORE i get paid? i cannot lie and say i was paid in full. can i change the language to say: contingent upon receiving funds from final Freedom Bank Draw request?

4 replies

May 22, 2020

Timing a mechanics lien release in exchange can be challenging, and the same is true for a filed Notice of Unpaid Balance. While this article was written for lien releases, the same is true here: Construction Lien Release Process: the Timeline is Tricky. Ultimately, it doesn't make much sense to release the Notice of Unpaid Balance before receiving payment. Once payment is received, the claimant has no legal basis for continuing to pursue the lien claim. Plus, it's not like subcontractors are lining up to file liens. However, once that Notice of Unpaid Balance gets released, it's entirely possible that all lien rights could become available (depending on the circumstances) - and the promise of a check won't do anything to extend deadlines. So, it should be possible to convince the bank or customer to make payment that way the Notice of Unpaid Balance can be released.

Conditional releases aren't really a thing

Mechanics lien waivers are essentially simple contracts. So, it's easy to add conditions to that contract - like only waiving lien rights once payment is made. Contrastingly, a release is immediately effective. Once a release is filed, the Notice of Unpaid Balance gets released from the property record. So, there isn't really a way to condition a release upon the receipt of payment - and that's why releases generally shouldn't be exchanged or filed until after payment gets made.

Alternative options to smooth out the release and payment process

For one, signing a document swearing you'll immediately send a release once you're paid could help. Such an agreement should be absolutely enforceable if you fail to release the claim. Another option is to request the use of escrow or some other third party. That way, the funds and release can be given at the same time without fear of the other party pulling out at the last second. Finally, standing firm isn't a bad option either as long as all of your rights are being preserved (more on that in a second). A claimant is within their rights to proceed with a payment claim until they get paid - and the claimant isn't required to make the process stress-free for the party making payment.

The deadline for sending a New Jersey arbitration demand is short - don't delay

Before going any further, keep in mind that New Jersey residential jobs have a convoluted mechanics lien process - it takes 3 separate steps. And, there's an extremely tight timeline for filing a Notice of Unpaid Balance, sending an arbitration demand, then actually filing a lien. You can learn about the process here: New Jersey Residential Mechanics Lien: A Convoluted Process. So, even if someone has promised to pay you, waiting too late to send the arbitration demand could result in the loss of your lien rights. And, if your lien rights are lost, then those parties who've promised payment could potentially back out. Make sure you aren't missing the arbitration demand deadline - which is 10 days after the Notice of Unpaid Balance is filed.

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