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The ABCs of Current NC Lien Law

November 11, 2010

Since we talked last week about possible changes to the lien law, I’ve had a few folks ask me to take a step back and discuss the ABCs of current lien law in North Carolina.  Ask and ye shall receive………..

 Part 1:  Lien Law Rights for Contractors, Subcontractors, & Design Professionals

Who can file a lien?

Anyone who furnishes materials or labor to improve real property can file a lien on that property.  This includes design professionals who provide services related to improvement of real property, contractors, and subcontractors (down to the 3rd tier). 

What types of liens are there in NC?

There are three types of lien claims in North Carolina.

1.  The Claim of Lien on Real Property (NC Gen. Stat. §44A-12) is for a person who contracts directly with the owner of the property.  This can be a general contractor, a separate independent contractor, or a design professional.

2.  The Notice of Claim of Lien upon Funds (NC Gen. Stat. §44A-18 and §44A-19) is available to subcontractors (down to third-tier subcontractors), and allows them to have a lien right to any funds owed to the party that contracted with them in the chain of title.  In other words, if the owner still owes money to the general contractor, and the owner receives a Notice of Claim of Lien upon Funds by a subcontractor (and the lawsuit to enforce the lien is thereafter properly filed), the owner cannot pay the general contractor until the subcontractor’s lien is extinguished.

3.  The Subrogated Claim of Lien on Real Property (NC Gen. Stat. §44A-23) also provides real property lien rights to the subcontractor, to the extent the party he contracted with has lien rights.

When and Where must a lien be filed?

Lien claims in North Carolina must be filed in the clerk of court where the property is located, within 120 days of the claimant’s last date of furnishing. 

What does “perfecting a lawsuit” mean?

A lawsuit must be filed to enforce the lien.  This is called “perfecting” the lien, and it must be done within 180 days of a claimant’s last date of furnishing.  The lawsuit can be filed in any proper county so long as an appropriate Lis Pendens is also timely filed in the county where the property is located. 

What special remedies are available for a lien claim?

If a lien lawsuit is perfected and a judgment rendered, the court can direct the property to be sold to satisfy the lien.  Additionally, you can recover attorney fees for the lien lawsuit.  Pretty cool, huh?

  souffle

Crafting a proper lien is like making souffle- no room for error!

In summary:

As you can imagine, liens can be very powerful tools to help ensure recovery of money owed to contractors and subcontractors on a project.  The key to exercising your lien rights is to keep watch on the running of the claim period (use of online resources can help with this)  and to ensure that the lien is (1) properly drafted; (2) timely served; (3) appropriately filed; (4) perfected with a timely lawsuit.  This is not an area where you can make a mistake—liens are subject to strict rules that must be followed to the t.  If in doubt about a lien issue, contact a knowledgeable construction law attorney in your jurisdiction.

We’ll continue our discussion with Part 2 (next Thursday), when we discuss how to handle a lien on your property if you are the Owner

Comments about your experience using liens to maximize your chances of recovery?  Post below.  [And as always, please sign up for an email subscription to the blog  if you have not already done so].

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Photo “Soufflé” by stu_spivack via Flickr/Wikimedia/Creative Commons

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12 Comments
  1. Ashley Campbell permalink

    Great post, thank you! For a lien novice like me, it was very informative. Also, love the souffle photo!

  2. Hi Melissa – Great primer on the construction lien laws in North Carolina. It gives a great baseline understanding of what a lien does, what type of instruments are available for filing in North Carolina, and the like. Will be mentioning on my Construction Lien Blog. Would you like to re-work this (slightly) and have it published on our blog as a guest post? I think that this would make a great post for our audience.

    • Scott–
      Thanks for the comment and your future mention. Would love to talk re: guest post. Drop me a line (mbrumback@rl-law.com) and give me more details on what you are looking for.

  3. Michael permalink

    Melissa,

    Thanks for the very helpful info! I was wondering, what rights does someone have if a lien has been falsely placed against them? I brought my car into an autobody shop after an accident to get an insurance quote. When I brought in the car it had body damage but was driveable. I got the insurance check and the owner of the shop called me and told me that I needed to come in and sign the check over to him. I told him that I wanted to pick up my car and drive it because I was not sure how many of the repairs I wanted to do and when due to my own financial situation. He told me that the car was no longer driveable because they had taken so much of it apart for the insurance quote. I was shocked that they would do this! He told me that he needed me to come in and give him money immediately so they could order parts. I explicitly told him that I did not want him to order any parts or do any work on the car. He called me back a few days later and very aggressively told me that I needed to come in and sign a contract with him and give him money to buy parts. I told him that I was not happy with the way they were dealing with me and that I just wanted my car back at that point. He told me that they had already ordered parts for the car the day after I told him not to! And that if I wanted my car back that I would have to pay a “30% restocking fee” on the price of the parts to get my car back. Now he is telling me that he is going to put a Mechanic’s Lien against me/my car for the 30%!

    What are my rights and what can I do about this sleeze who is obviously trying to shaft me?

    Thank you,
    Michael

    • Michael:
      Thanks for commenting. Mechanics liens and real property liens are somewhat different creatures, and I don’t have any experience with mechanics lien issues. However, you might want to call Legal Referral Service line at 919-677-8574 and have them set you up with a half hour consultation with someone who has expertise in that area of law. Good luck to you.

  4. Melissa, thanks for maintaining this site I find it very informative. I have a question: Do you know if non-licensed consultants are eligible to file a lien against real property in NC. I am an environmental consultant and provide a variety of services to land developers such as wetland delineation, permit preparation, erosion control consulting, and assistance with a variety of water quality related regulatory issues. Would these services be considered labor? Would an environmental consultant be considered “any person who performs labor”?

    • John:
      Thanks for your comments. You raise an interesting question about non-licensed consultants.

      Under the statute, “Improve” means to

      build, effect, alter, repair, or demolish any improvement upon, connected with, or on or beneath the surface of any real property, or to excavate, clear, grade, fill or landscape any real property, or to construct driveways and private roadways, or to furnish materials, including trees and shrubbery, for any of such purposes, or to perform any labor upon such improvements, and shall also mean and include any design or other professional or skilled services furnished by architects, engineers, land surveyors and landscape architects registered under Chapter 83A, 89A or 89C of the General Statutes, and rental of equipment directly utilized on the real property in making the improvement.

      It appears that your work would *likely* not fall under that definition, absent some physical improvement itself on the real property; i.e., actual marking in the field or some such. (Nothing is absolute in the law, and an argument could be made that you do fall under it). However, even without a lien right, you can always sue under a breach of contract theory. Call me if you want to discuss further.

  5. Renee permalink

    You write that those who “provide services related to improvement of real property, contractors, and subcontractors (down to the 3rd tier)” are able to file a lien. As a general contractor, I paid in full the subcontractor who installed tile floors, showers and backsplashes in a custom house. I then received a Claim of Lien which was filed by the person who actually did the work. It seems the the subcontractor I hired had subbed the work to someone else (a 3rd tier subcontractor?). What recourse do I have?

    • Renee:
      Thanks for your comment. If you paid your subcontractor in full, then the fact that the subcontractor sub’d it out again should not matter to you. You’ve undoubtedly received a Notice of Claim of Lien on Funds plus a Claim of Lien on Real Property. If you’ve met your obligations to the party you contrated with, and do not owe that party more money, then they cannot successfully go after you. If, however, you still owe any money (at all) to your sub, you cannot pay that money to them until the lien issues with their subs are resolved. It is possible that the sub-subcontractor also has claims on the real property, but that is an issue for the owner and not for you as G.C. Did you get a lien waiver from your sub when you paid him? If so, that should also protect you from claims of the sub’s sub.

Trackbacks & Pingbacks

  1. The 123′s of Current NC Lien Law: Issues for Owners « Construction Law in North Carolina
  2. Will North Carolina Be Changing It's Mechanic Lien Laws? | Construction & Mechanics Lien Blog

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