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North Carolina Mechanic’s Lien Rights: The Short Summary©

Authored by attorney Neil Lowenstein1

Generally speaking, the North Carolina code structure gives two types of liens: 1) a claim of lien on real property; and 2) a claim of lien on funds. Attorney’s fees can also be discretionarily awarded by the court to the prevailing party (NCGS § 44A-35).

Perfecting and enforcing lien claims are statutorily driven (see NCGS Chapter 44A), complicated, and fact specific. Legal advice should be sought regarding specific issues or requirements, but the following briefly summarizes aspects of North Carolina law regarding claims of lien on real property and claims of lien against contract funds.

  1. CLAIM OF LIEN ON REAL PROPERTY:

  1. Remedy: Lien claim on underlying real property, for value of the improvements to that property, if the improvements provided pursuant to an express or implied contract for labor, materials, equipment, design or survey services, to the extent of the owner’s interest (NCGS §§ 44A-8 and -9). The claim of lien relates to and takes effect retroactively to time of the first furnishing of labor or materials (NCGS § 44A-10).

  1. Availability: Those with a direct contract with the owner (NCGS § 44A-8) or those with subrogation rights – first, second, and third-tier subcontractors (NCGS § 44A-23). Lower tiers have additional notice requirements (NCGS § 44A-23).

  1. Filing requirements: Claim of lien must be filed NLT 120 days from when labor or materials last furnished (NCGS § 44A-12). Claim of lien format must substantially comply with statutory form (NCGS § 44A-12(c)) and be filed in the office of the clerk of superior court where real property located (NCGS § 44A-12(a)).

  1. Time to enforce: Action to enforce claim of lien must be filed NLT 180 days from when labor or materials last furnished (NCGS § 44A-13(a)).

  1. Lien agent notice: Lien rights are lost if there is an intervening sale or mortgage prior to notice to lien agent. Lien agent notice required for all contracts for improvements worth $30,000 or more except work on existing owner-occupied residential structures.

  1. Responsibility to designate lien agent: Property owner is responsible to designate the lien agent NLT time owner first contacts with any person to improve real property (NCGS § 44A-11.1(a)). The N.C. Department of Insurance maintains an approved list; currently only title insurance companies and title insurance agencies qualify (NCGS § 44A-11.1(b)). See www.LiensNC.com (online NC lien agent system).

  1. Responsibility for providing contact information: Owners must provide lien agent contact information within 7 days of request to them (NCGS § 44A-11.2(b)). Contractors or subcontractors must provide lien agent contact information to lower-tier within 3 days of contracting with lower tier (NCGS § 44A-11.2(c)).

  1. Posting: Lien agent contact information should be posted with building permit or otherwise on site until completion of all construction (NCGS § 44A-11.2(d) and (e)). Lien agent contact notice must meet minimum statutory requirements (NCGS § 44A-11.2(f) and (i)).

  1. CLAIM OF LIEN ON FUNDS:

  1. Availability: Granted to all contractors of any tier to the extent of the monies owed to the tier immediately above them (NCGS § 44A-18).

  1. Timing: No time limit to file and is effective retroactively to first furnishing of labor, materials or rental equipment (NCGS § 44A-18(f)). But not perfected until notice of claim of lien upon funds given to obligor (NCGS § 44A-18(g)).

  1. Notice requirements:

  1. Substance: Notice must include all statutorily required information (NCGS § 44A-19(a)) and substantially follow statutory form for applicable tier (NCGS § 44A-19(b) and (c)).

  1. Service: Notices shall be served by personal delivery or by service authorized under Rule 4 of the North Carolina Rules of Civil Procedure (NCGS § 44A-19(d)). Notice does not get filed with the clerk of superior court, unless attached to a claim of lien on real property that is filed with the clerk or for purposes of discharging the claim of lien upon funds (NCGS § 44A-19(e)).

  1. Duties and liability of obligors: Upon receipt, obligors are under a duty to retain funds subject to all liens up to the total amount received (NCGS § 44A-20(a)). A perfected notice flows with any payments and obligors are personally liable up to the amounts of wrongful payments, up to the total of claims received prior to payment (NCGS § 44A-20(b)).

  1. LIEN CLAIM WAIVERS:

  1. Timing restrictions: Pre-work lien waivers of either claims of lien against real property or claims of lien against contract funds are void (NCGS § 44A-12(f)). But this does not prohibit later subordination or release (NCGS § 44A-12(f)).

  1. False statements: False written statements of sums due or claimed due are Class 1 misdemeanor, and additionally subject claimant to licensure disciplinary action (NCGS § 44A-24).

Copyright 2015, Vandeventer Black LLP. Subcontract rights and obligations involve complex legal requirements. This summary of North Carolina subcontract related laws is for general information purposes and is not intended as specific legal advice.
 1 Neil Lowenstein is licensed in North Carolina, as well as Virginia and the District of Columbia. Neil chairs Vandeventer Black’s Construction and Government Contracts Practice Group.

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