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December 2012
IMPORTANT CHANGES: North Carolina Construction Lien Law
By William A. Navarro

     The North Carolina Legislature made several changes to the mechanic’s lien and bond law, some of which begin January 1, 2013 and some of which begin April 1, 2013. Please consult an attorney as there are specific and strict requirements which must be followed to comply with the lien law. Also effective January 1, 2013, sanctions for the filing of fraudulent lien waivers will expand to include potential loss of contractor’s licenses.

     Beginning January 1, 2013, a Claim of Lien on Real Property filed by a contractor must also be served on the owner. Up to now, such service was not required. A subrogation claim of lien filed by a subcontractor must also be served on the contractor as well as the owner. A certification that the Claim of Lien has been served on the necessary parties must also be included with the Claim of Lien. Therefore, a claim of lien is perfected upon both the service of the claim of lien upon the owner (and contractor if it is a subrogation claim of lien) and the filing of the Claim of Lien.

     One notable change in the filing of a subrogation claim of lien being asserted by a subcontractor is that, beginning January 1, 2013, the new law allows the subcontractor to use either its own date of first or last furnishing of labor or materials or the contractor’s dates for the first or last furnishing labor or materials.

     Beginning April 1, 2013, the lien law will require potential lien claimants to provide written notice to what is referred to as a “Lien Agent” to preserve their lien rights. Chapter 44A-11.1 will require an owner to designate a Lien Agent no later than the time the owner first contracts with any person to improve real property where the cost of the project is $30,000 or more at the time the original building permit is issued, except for certain existing single family residential dwelling units.

     A Lien Agent is defined as a title insurance company or title insurance agency designated by an owner. Failure to follow the new requirements specified in the statute could result in the potential lien claimant having its lien rights terminated or subordinated to the interests of others.

     For any project subject to a Lien Agent designation, a sign disclosing the contact information for the Lien Agent must be conspicuously and continually posted on the property until completion of all construction if the contact information for the Lien Agent is not contained in a building permit or attachment thereto posted on the property.

     If the contact information for the Lien Agent is not on the building permit or posted on the property, a potential lien claimant can deliver to the owner a written request for the Lien Agent contact information and the owner must, within seven days of receiving the request, provide written notice to the potential lien claimant containing the contact information.

     A contractor or subcontractor must, within three days of contracting with a lower-tier subcontractor who is not required to furnish labor at the site of the improvements, provide the lower-tier subcontractor with a written notice containing the contact information for the Lien Agent designated by the owner. Failure of the contractor or subcontractor to provide this notice shall subject the contractor or subcontractor to damages suffered by the lower-tiered subcontractor resulting from the failure to give this notice.

     In order to preserve its full lien rights under the new law, a potential lien claimant needs to serve a Notice to Lien Agent on the Lien Agent. The best way to preserve full lien rights is to serve a Notice to Lien Agent within 15 days after the first furnishing of labor or materials by the potential lien claimant. The Notice to Lien Agent must include certain information specified in the statute.

     If the potential lien claimant fails to serve a Notice to Lien Agent on the Lien Agent within 15 days after the first furnishing of labor or materials, a potential lien claimant can still perfect a claim of lien on real property. However, by waiting a claimant may have its lien subordinated to a previously recorded mortgage or deed of trust or have its lien rights terminated if the property is sold before the service of the filing of a Claim of Lien.

William A. Navarro is an attorney at Wishart, Norris, Henninger, P.A.
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