NJ Prompt Payment Act, Lien Rights & Why Bonds Matter

The Prompt Payment Act

New Jersey's Prompt Payment Act (N.J.S.A. 2A:30A-1 et seq.) sets a default payment timeline for construction contracts. Once a billing or invoice is approved and certified, the owner generally must pay within 30 calendar days. A prime contractor must then pay subcontractors within 10 calendar days of receiving payment, and the same 10-day rule cascades down the chain.

Two teeth make it useful:

• Interest accrues on late payment at the prime rate plus 1%.
• Attorney's fees go to the prevailing party in a dispute over the amount due — the provision that actually makes small claims economic to pursue.

The Act also permits a contractor or sub to suspend performance after seven calendar days' written notice if undisputed amounts go unpaid. Suspending work is a serious step with contractual consequences, so document the notice precisely and take advice before you walk.

Withholding is allowed for genuine disputes, but the withholding party must give written notice with the reason. Silent non-payment is the violation.

Construction lien rights — and the deadlines that kill them

New Jersey's Construction Lien Law gives contractors, subs and suppliers a lien on the improved property for the unpaid value of work or materials. The deadlines are unforgiving and the courts enforce them literally.

• Commercial property: file the lien claim within 90 days of the last date you provided work, services, materials or equipment. "Last date" means real work — warranty visits and punch-list trips generally don't restart the clock.
• Residential property: a two-step process. You must first serve a Notice of Unpaid Balance and Right to File Lien (NOU) and simultaneously demand arbitration, within 60 days of last work. An arbitrator determines the validity of the lien claim before you can file it, and the lien must be filed within 120 days of last work.
• Foreclosure: a filed lien must be foreclosed within one year of last work, or it lapses.

Overstating a lien or filing one without a basis carries real penalties, including costs and attorney's fees. This is not a self-help area; the residential track in particular is where contractors lose rights by handling it themselves.

Where bonds replace liens

You cannot lien public property. On New Jersey public work above the bid threshold, the general contractor posts payment and performance bonds, and your remedy as a sub or supplier is a claim against the payment bond.

• Payment bond — guarantees subs and suppliers get paid. Bond claims have their own notice and suit deadlines set by statute and by the bond form; read the bond, don't assume.
• Performance bond — guarantees the owner that the work gets completed if the contractor defaults.
• Bid bond — guarantees the bidder will enter the contract at the bid price if awarded.

Private owners on larger projects often require the same, and a private bonded job typically comes with a bonded-off lien procedure.

Getting bonded as a small contractor

Surety is credit, not insurance. The surety expects to be repaid if it pays a claim, and you sign a personal indemnity agreement saying so. Underwriting looks at the classic three Cs:

• Capital — working capital and net worth, from reviewed or CPA-prepared financials as capacity grows.
• Capacity — completed jobs of comparable size and type, plus a work-in-progress schedule.
• Character — credit history, references, and how you've handled disputes.

Small contractors typically start with SBA-supported or small-bond programs approving single jobs in the low-to-mid six figures, then build an aggregate program over time. Rates commonly run roughly 1–3% of contract value, better as your financials strengthen.

Start early. A first bond approval takes weeks and requires documents most small contractors don't have on hand — job cost reports, a WIP schedule, an accountant who understands percentage-of-completion.

Practical payment hygiene

• Get the contract in writing, with a payment schedule, retainage terms and a change-order procedure.
• Invoice on schedule with backup — nothing delays payment like an unsupported invoice.
• Track your last-work date on every job; it starts every lien deadline you have.
• Send the seven-day written notice under the Prompt Payment Act rather than making phone calls nobody documents.
• Calendar the 60/90/120-day lien deadlines the day a job goes past due, and involve counsel before day 45.
• On public work, get a copy of the payment bond at the start, not when you're already unpaid.
• Don't sign broad lien waivers for payments you haven't actually received.

None of this is insurance, but it's the same discipline: read the document before you need it. If you want bonding capacity built into your program alongside coverage, start with the intake.

Frequently asked

Want this sorted for your own operation? Quote your whole program in one intake — GL, Workers Comp, Commercial Auto, Tools & Equipment, Umbrella and Builders Risk — or talk to a producer. Same business day.