NC Lien Law - A tool for contractors to secure payment

For many of my contractor and subcontractor clients, the thought of not receiving payment for satisfactory work performed on a construction project is frightening. These businesses have bills to pay, payroll to run, and might even need to purchase additional materials for the job they are not getting paid on. Fortunately, N.C.G.S 44A, provides a bit of relief. In case you want to take a peak yourself, HERE is a link to the North Carolina’s lien statutes.

 Timing is Everything. . .

When it comes to utilizing liens to ensure a contractor receives payment, timing is everything. If a contractor waits too long after leaving a project, they can lose their lien rights.  A claim of lien on real property (more on this in a bit) must be filed, and served on the owner and any higher tier contractors/subcontractors, within 120 from the date of last furnishing. Then, pursuant to N.C.G.S. 44A-13, any action to enforce a claim of lien on real property must be commenced no later than 180 days after the date of last furnishing.

What is a claim of lien on real property?

A claim of lien on real property is a security interest that secures payment for labor, materials, or services performed, against the property that was improved by those same labor, materials, or services. If the legal process was carried all the way through, eventually the court could order the improved property be sold in order to satisfy the lien claims.

Who is entitled to file a lien?  

N.C.G.S 44A-8 states that “Any person who performs or furnishes labor or professional design or surveying services or furnishes materials or furnishes rental equipment pursuant to a contract” has the right to file a lien for labor performed. Thus, it is possible to claim a lien without setting foot on the project site, which is good news for architects, engineers, and off-site equipment rentals.

 You said something about 120 and 180 days from last furnishing. What does that mean?

This is the last time the contractor provided labor, materials, or services on the job site. If no lawsuit is filed within 180 days of the date of last furnishing, any lien that was previously filed is discharged. Based on the Court’s decision in Blalock Elec. Co. v. Grassy Creek Dev. Corp., Punch-list work generally qualifies as furnishing, but warranty work or minor punch-list work performed long after the owner has occupied the building does not.

Do I need a contract with the Owner?

Not necessarily . . . Typically subcontractor’s lien rights arise through subrogation. Meaning that a subcontractor’s lien rights are as good as the lien rights of the party they contracted with. North Carolina Law allows a First, Second, or Third tier subcontract to claim a lien on real property.

In my upcoming post I’ll discuss claims of lien upon funds, and all discuss what a lien agent is, and what effect is has on lien claims.