Residential vs. Commercial: The Difference is Eye-Opening

Oct. 5, 2017

What is residential construction? When should a notice to owner be sent? How long thereafter should the lien be filed? These are all relevant questions, and the easy answer is: it depends where the project is located. Each question can be answered differently depending on the state, and the answer to the second question also depends on whether the project is commercial or residential.

Some states such as New York, Delaware, Vermont and Rhode Island have straightforward or no notice requirements, but NACM suggests serving the notice 45 days from last furnishing as an identifier to to owner that your company needs to be paid. There are also states such as Iowa, Virginia, Indiana and New Jersey where notices can cause headaches for trade creditors and material suppliers. Not only can notices differ from state to state; they can also fluctuate within that state if the project is commercial or residential.

If selling directly to the prime contractor in Iowa on a commercial project, a notice is not required, but if working with anyone other than the prime contractor, suppliers have 30 days from first furnishing of labor or material to serve the prime contractor with the notice.

Subs and suppliers on residential Iowa projects must serve the owner and register the preliminary notice with the state's Mechanic's Notice and Lien Registry (MNLR). If there is no notice of commencement in the registry, the subcontractor can post the notice in the MNLR on behalf of the general contractor or owner, but the sub also needs to post its preliminary notice to preserve lien rights. "A preliminary notice must also be printed and submitted by fax or U.S. mail," added Iowa's Secretary of State website. It is important to note that in Iowa material suppliers are considered subcontractors.

Residential projects in New Jersey provide a unique scenario for suppliers. Such projects include any "residential community," according to NACM's Lien Navigator, meaning New Jersey is the only state to consider apartments residential projects. Commercial projects in New Jersey have no notice requirements, but residential buildings require a Notice of Unpaid Balance to be filed no later than 60 days from last furnishing.

The Notice of Unpaid Balance and Right to File Lien (NUB) must be served and filed together with the clerk's office. Under the Construction Residential Lien Law in New Jersey, a Demand for Arbitration is required to go before the American Arbitration Association. "The purpose of the arbitration is to establish an efficient and fair process for determining the validity and amount of a lien claim," according to the arbitration rules.

The lien must be filed within 120 days of last furnishing or within 10 days of the arbitrator's decision. Among the reasons to not be awarded the ability to lien include not having proof of delivery to the job site or an untimely filed NUB.

These reviews of notice and lien laws are a prime example of how important it is to obtain job information up front. It is also imperative to know the type of project and where it is located to help determine when and where to file notices and liens.

– Michael Miller, editorial associate

National Association
of Credit Management

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