Arbitrator’s Judgment Regarding Construction Lien Must Be Confirmed by Court

By Fredrick P. Niemann

Arbitration offers an alternative to litigation, allowing parties to present their arguments to a neutral arbitrator and allowing the arbitrator to make a decision on the matter. It typically offers a more informal forum, with the arbitrator ruling on what he/she deems to be the fairest result. The law is less binding in arbitration and certain rules and procedures that apply in court, such as the rules of evidence don’t apply. Parties simply present their best case to the arbitrator and the arbitrator decides what they believe to be the best result.

Construction is a field in which arbitration is very popular. Disputes often arise throughout the building process between owners, contractors, and subcontractors. Arbitration provides a cheaper, easier forum for the parties to address their issues. As one is probably aware, the most common way for builders to ensure they get payment for work done is to have a lien placed on the property. Liens effectively entitle contractors to money judgments against the owner of the property. In order for a lien to be placed on property, however, Courts must approve them.

In a recent New Jersey court case, the question arose as to whether an arbitrator could grant a contractor a lien on a property. The facts involved a dispute between a homeowner and contractor after the homeowner had performed construction on the homeowner’s house. Since the parties had agreed in their contract that all disputes would go to arbitration, the case first came before an arbitrator. The arbitrator ruled that the contractor had a valid lien claim against the homeowner. The homeowner, claiming that the courts must confirm the lien, brought the case to trial. The trial court sided with the contractor, stating the arbitrator’s ruling was legitimate and the contractor would be entitled to a money judgment resulting from the lien. On appeal however, the New Jersey Court of Appeals reversed the decision. The Court stated that liens must be confirmed in litigation and the arbitrator was not able to establish a valid lien without the confirmation of the Courts. The Courts therefore remain the only forum where liens may be established.

Arbitration law can be a complicated area of expertise. With so many disputes arising, it is important to have a knowledgeable Construction Law Attorney by your side. Please call Fredrick P. Niemann, Esq., a NJ Construction Law Attorney today at 855-376-5291 or email him at fniemann@hnlawfirm.com/. He would be more than happy to meet with you to address any arbitration matter you may have.  For further information, go to http://www.youtube.com/user/NJBusinessLaw#p/search/0/_r6sY2W8L2E to learn more.

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