Understanding North Carolina s Amended Lien Law

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1 Understanding North Carolina s Amended Lien Law By Ted Edwards

2 What s new about the new lien law? Claim of Lien on Real Property/Subrogation liens Existing Law allows a lien to be perfected when filed in the Clerk s office within 120 days. Effective Jan 1 st, lien on real property must be filed in the Clerk s office and served on the Owner within 120 days of last work on the Project.

3 What s new about the new lien law? N.C. Gen. Stat. 44A-11.1 requires owners to designate a lien agent prior to contracting to improve property if the estimated cost is more than $30,000. (Effective April 1, 2013). Owner must identify lien agent in application for building permit, provide lien agent information to inspections department and/or post lien agent information on the job site.

4 What s new about the new lien law? N.C. Gen. Stat. 44A-11.2 requires a party providing labor, materials or services for the improvement of real property to serve a Notice to Lien Agent to preserve its lien rights against the real property. Service of the lien agent can be done by certified mail, signature confirmation, physical delivery, facsimile, overnight delivery services, or but delivery receipt and confirmation are always required.

5 What s new about the new lien law? Within 7 days of receiving a written request by a potential lien claimant, the owner must provide contact information for its lien agent. Within 3 days of contracting with a materials supplier, subcontractors must provide the supplier with written notice containing the contact information for the lien agent. Failure to do so, subjects the subcontractor to actual damages if the supplier loses its lien rights.

6 What s new about the new lien law? A sign disclosing the contact information for the lien agent shall be posted at the Site until the completion of construction. Lien Agent requirements do not apply if the project is less than $30,000 or if the project is for improvements to an existing single-family residence that is occupied by the owner.

7 What s new about the new lien law? Lien claimant is not required to comply with the noticing requirements if Owner fails to identify the Lien Agent. Failure to serve a Notice to Lien Agent within 15 days of furnishing services to the Property will result in loss of lien right if the property is sold or subordination if the property is refinanced.

8 What s new about the new lien law? N.C. Gen. Stat. 44A-12 requires a claim of lien on real property to include a certification that the named parties have been served with the lien. Service can be accomplished by personal delivery, USPS, or specified overnight delivery services. Service must be to the address listed on the building permit, the address listed on the county s tax roll, or the address for the party s registered agent.

9 What s new about the new lien law? N.C. Gen. Stat. 44A-23 allows subcontractors to use the dates which higher-tier contractors first and last provided services to the project on subrogation liens. N.C. Gen. Stat. 44A-23 also removes the requirement to attach the notice of claim of lien upon funds to a subrogated claim of lien on real property. N.C. Gen. Stat. 44A-24 provides that execution of a false lien waiver is deceit and misconduct subject to disciplinary action by the contractor licensing board.

10 What s new for public projects? N.C. Gen. Stat. 44A-27 requires general contractors on public projects where a payment bond is required to provide subcontractors with a project statement. The project statement must contain the name of the project, the project address, name of the contracting body, name, phone number and address of the contractor s registered agent and the name and address of the surety which issued the bond. Each contractor must be provided with the project statement. No agreement with a lower-tier subcontractor can be enforced against the subcontractor until the project statement has been provided to the subcontractor.

11 What s new for public projects? N.C. Gen. Stat. 44A-27 requires subcontractors and suppliers to serve a Notice of Public Subcontract to preserve claims under the General Contractor s payment bond on public contracts of over $20,000. The Notice of Public Subcontract must be filed within 75 days of the date the labor or materials were provided. The Notice of Public Subcontract must be served by all subcontractors and suppliers who are not in direct contract with the general contractor in order to preserve claims under the general contractor s payment bond.

12 What s new for public projects? N.C. Gen. Stat. 44A-27(b) requires general contractors to provide subcontractors and suppliers with a copy of the payment bond within seven days of a written request. Failure of the general contractor to meet the seven day deadline exempts the subcontractor and supplier from the 75 day recovery limitation.

13 How will the new lien law affect the way we do business? Almost every project, public or private, now requires a notice to be served. A failure to service a Notice to Lien Agent can lead to the loss of lien rights if the property is sold or refinanced. Notice of claim of lien on funds must be served on owner and lien agent.

14 How will the new lien law affect the way we do business? Subcontractors should always request a copy of the payment bond from the general contractor on public contracts. If a subrogation lien right is asserted, the claim of lien on real property must list the name of the contractor through which subrogation is being asserted. N.C. Gen. Stat. 44A-18 provides that a notice of claim of lien upon funds is immediately effective upon the first furnishing of labor, materials or services by the subcontractor.

15 How will the new lien law affect the way we do business? Effective January 1 st, the Claim of Lien on Real Property form has been amended to require certification that all necessary parties have been served. For subrogation liens, the Claim of Lien on Real Property form also requires listing of the name of the contractor through whom subrogation is being asserted.

16 How will the new lien law affect the way we do business? A subcontractor who fails to serve a Notice of Public Subcontract is precluded from making claims against the payment bond for labor or materials provided more than 75 days prior to the claim. N.C. Gen. Stat. 44A-13 provides that a former or subsequent owners of the property are not necessary parties to the lawsuit to enforce the lien.

17 How will the new lien law affect the way we do business?

18 Ted Edwards Smith Moore Leatherwood LLP 434 Fayetteville Street, Suite 2800 Raleigh, North Carolina (919)