A version of this article was originally published in April 2013 and has now been updated.
Effective April 1, 2013, project owners in North Carolina are now required to designate a Mechanic’s Lien Agent (MLA) for the vast majority of construction projects, and contractors or other potential lien claimants must now identify themselves through written notice to the MLA if they want to ensure their lien priority against lenders or purchasers.
The requirement for designating an MLA applies to all new private construction projects — residential or commercial — where the total cost of the improvements is $30,000 or more (but excluding improvements to existing family residences). The owner (or contractor on its behalf) must designate the MLA at the time of contracting and then post the MLA’s information at the project, typically on the building permit itself. With few exceptions, potential lien claimants must then provide notice to the MLA within 15 days after first furnishing labor or materials to the project to preserve their lien priority in the event the owner conveys any interest in the property.
The new MLA requirements will significantly benefit title insurers, who lobbied hard for their adoption to address so-called “hidden liens” that only come to light after closing. Many contractors and even some owners, however, have expressed significant concern over the increased administrative burden required by the new scheme. In a bid to allay these concerns, the title industry developed a useful new website to simplify the MLA process for owners and contractors alike.
The new NC Online Lien Agent System (LiensNC) at www.liensnc.com is intended “to make the filing of MLA notices as simple and fast as possible for all users.” It succeeds. Intuitive forms provide a remarkably simple method for owners (or contractors on their behalf) to select an MLA from a dropdown menu and enter pertinent information about their project. The LiensNC system then automatically notifies the selected MLA and generates an Appointment of Lien Agent form, which must be submitted to the local permitting office and posted at the site with the building permit as required by statute. Lien claimants can easily search for and associate their Notice to Lien Agent filings with a particular project, prefill project information into the notice, and automatically deliver it to the lien agent and other registered users. After filing, the system delivers a receipt to the potential lien claimant for its records. All filed notices are easily searchable through the application, providing a quick index to activity on the project for interested parties like lenders or title insurers.
A topical guide with more information and step-by-step instructions for the MLA appointment and notice processes assist users in completing the forms. In addition, a useful overview video of the online application prepared in anticipation of the launch is still available for download as a PowerPoint here.
Fees for using the LiensNC application are modest. It costs $25 to file an Appointment of Lien Agent on one- to two-family dwellings and $50 for all other projects. There is no fee for potential lien claimants to file a Notice to Lien Agent.
Another particularly useful feature of the application is its use of unique Quick Response (QR) codes—special square bar codes that can be read by a smartphone camera—for each registered project. All LiensNC filings contain these QR codes, which link back to the details of the filing and construction project. When the QR code is posted at the project site, potential lien claimants can scan the QR code with their iPhone, Android phone, or other similar smartphone device to easily file a Notice to Lien Agent with the key information pre-populated into the form. Although potential lien claimants are always free to manually complete their own forms, the QR code can significantly streamline the process as contractors and subcontractors adjust to the new technology.
The new lien laws don’t mandate use of the online LiensNC application. Nevertheless, most construction participants expect the website to become the preferred clearinghouse for MLA information and notices in North Carolina. So far, it appears this will be the case. The online LiensNC application officially launched on April 1 and already contains well over 20,000 filings for projects across the state.
Local permitting offices have surely appreciated receiving standardized Appointment of Lien Agent forms with building permit applications. Closing attorneys, lenders and title insurers will find the search functions incredibly useful in researching potential lien claimants at or before property closings. And owners and contractors should appreciate the user-friendly interface and simplified procedure for filing the various MLA-related notices now required by law. The application is by no means perfect, but it seems to have something for everyone.
It will be very interesting to see how the Web application is accepted by the construction industry over time. My guess is that most of us will include it among our Internet favorites in short order. Take the time now to familiarize yourself with the LiensNC website and the new MLA requirements. As always, consult an experienced construction attorney with questions about specific situations under the new North Carolina lien laws.