Changes to North Carolina Mechanics Lien Laws

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[authors: Thomas H. Davis Jr., Daniel G. Cahill]
​In July, Governor Perdue signed two bills into law which make substantial changes to the state’s mechanics lien and bond laws.  With respect to private projects, the most significant changes relate to the creation of “Lien Agents” who must be placed on notice by any potential lien claimant.

Beginning April 1, 2013, all private construction projects valued at $30,000.00 or more will require the designation of a Lien Agent.  The project owner must designate the Lien Agent from a list of title insurance companies or insurance agents maintained by the N.C. Department of Insurance.  The Lien Agent is entitled to collect a fee from the Owner of not more than $50.00.

If a building permit is required for a project, the permit is required to identify the Lien Agent and be posted at the project site.  If the building permit fails to identify the Lien Agent, or if no permit is posted, a lien claimant can submit a written request to the owner to identify the Lien Agent.  The owner must respond to this request within seven (7) days.  Likewise, a contractor or subcontractor must provide a materials supplier with written notice identifying the Lien Agent within three (3) business days of contracting with the supplier.

Any potential lien claimant (i.e., contractor, subcontractor or materials supplier) who wishes to preserve its full lien rights must serve a Notice on the lien agent.  Under the new statute, the Notice must include the following:

  1. lien claimant’s name, mailing address, telephone number, fax number and electronic mailing address
  2. the name of the party with whom the potential lien claimant contracted
  3. a description of the real property sufficient to identify it
  4. notice of the potential lien claimant’s right later to pursue a claimed lien for the improvements described in the Notice

In order to preserve all lien rights, the potential lien claimant must serve the Notice on the Lien Agent within fifteen (15) days after first furnishing of labor or materials to the project.  Failure to file the notice of lien within this time can result in the termination of the claimant’s rights if the property is sold or the subordination of the lien claimant to a new deed of trust or mortgage.  The Notice must be served by one of several designated methods including physical service of the notice (with a receipt of delivery) or by certified mail, return receipt requested.

The requirement that Notices to a Lien Agent be served is mirrored in another change to the lien laws.  Beginning January 1, 2013, all claims of lien on real property must be served on the owner, and a claim of lien on real property asserted by a subcontractor or supplier by subrogation must be served upon the contractor as well as the owner.  Prior law allowed a claim of lien to be filed but not served.  Beginning in January, a claim of lien on real property will not be perfected until it is both filed and served.  Therefore, service and filing of the claim of a lien on real property must occur no later than 120 days from the last furnishing of labor or materials to the project by any person claiming the lien.

Owners, contractors, subcontractors and suppliers need to revise their current procedures with respect to potential lien claims to take into account the significant changes wrought by the recent session of the General Assembly.  New forms for a Notice to Lien Agents need to be developed to accommodate the modifications required  for lien claims on real property.