Source: https://www.lexisnexis.com/legalnewsroom/real-estate/b/real-estate-law-blog/archive/2012/08/14/williams-mullen-changes-to-north-carolina-s-mechanic-s-lien-and-payment-bond-laws.aspx?Redirected=true
Timestamp: 2017-09-23 19:05:59
Document Index: 764506122

Matched Legal Cases: ['§ 44', '§ 44', '§ 44', '§ 44', '§ 44', '§ 58', '§ 44', '§44', '§ 44']

08-14-2012 | 08:48 AM
Subcontractors must: (1) provide the lien agent information to their off-site subcontractors within 3 days of contracting; (2) serve their own "Notice To Lien Agent" within 15 days of their first furnishing; and (3) include the lien agent in any service of a Notice of Claim of Lien On Funds.
The new legislation introduces a new player to the lien process, the "Lien Agent." The Department of Insurance is charged with creating and maintaining a list of authorized lien agents. Presumably, these will be title companies. G.S. § 44A-7.
For projects in excess of $30,000, that are not an improvement to an existing single family owner-occupied residence, the owner must designate a lien agent at the time it first enters into a contract to improve the property. The owner is then required to serve its notice of designation on the lien agent, together with the details of the project: street address, tax map and lot and block number, reference to recorded instrument or other designation of the property. G.S. § 44A-11.1. If the project is a single family residence, the owner must also include in the notice of designation the contractor's information. Within three (3) business days of receipt of an owner's designation, the lien agent must acknowledge the designation to the owner. Within seven (7) days of a request, an owner will provide the contact information for the lien agent to the requesting party. G.S. § 44A-11.2.
The new law requires that the lien agent information be posted on the property. It assures this by requiring that the lien agent information be given to the inspections department as part of the building permit application and, in addition, by providing that a sign disclosing the lien agent information be posted on-site, if it is not included in the building permit. For a failure to provide this information, liability is imposed on the contractor for losses incurred by any subcontractor who would otherwise have had notice of the lien agent. For single family residences, a contractor is compliant if the owner complies by including the contractor's name in the notice of designation.
Since off-site subcontractors cannot be expected to look at the building permits or job site postings, the new scheme requires that a contractor or subcontractor who contracts with a lower tier subcontractor that is not required to furnish labor at the site, give such subcontractor written notice of the lien agent's contact information within (3) business days of contracting with such lower tier subcontractor. This can be accomplished by including the information in the contract or purchase order. Failure to provide the information exposes the contractor or subcontractor to liability for damages incurred by a subcontractor that does not receive the information. G.S. § 44A-11.2(c).
The lien agent serves as a central repository for lien claimants and claims information. The lien agent receives notices from all contractors and subcontractors on the job that they are in fact on the project, together with the basics of their contracts. To protect its lien rights, a lien claimant, which is defined so broadly as to include the contractor, subcontractors and suppliers, must serve their "Notice to Lien Agent" on the lien agent within 15 days of firstfurnishing. This notice states the potential claimant's name, the party it contracted with, the property description, and notice of a right to subsequently pursue a claim of lien. This document is NOT filed. G.S. § 44A-11.2. Within three (3) business days of receipt of a "Notice to Lien Agent" by a potential lien claimant, the lien agent must confirm receipt to the claimant. Thereafter, the lien agent is charged with maintaining a record of all notices it receives. Thus, under the scheme, with some exceptions, all contractors and subcontractors should end up serving a "Notice to Lien Agent" such that, by the end of the job, the lien agent will have a list of all potential lien claimants.
In addition to receiving the Notices to Lien Agent, the lien agent is responsible for providing this information to the other players on the project upon request. Within one (1) business day of receipt of a request by an owner, title company, potential lien claimant, purchaser, or closing attorney, the lien agent must provide the requesting party with notice of the potential lien claimants who have served him with a "Notice to Lien Agent." If the lien agent also received notice from the owner regarding a general contractor on a single family residence, it shall also include the contractor information in its response. G.S. § 58-26-41. Only if specifically requested must the lien agent provide copies of any notices of lien served on him. Closing attorneys must request copies of notices received by the lien agent to avoid professional negligence claims - not more than five (5) business days before closing. G.S. § 44A-11.1(f).
A subcontractor seeking to enforce the contractor's lien on real property by right of subrogation under G.S. §44A-23 must: (1) serve its Notice to Lien Agent within 15 days of its first furnishing; (2) serve its Notice of Claim of Lien on Funds on the Owner and all above it in the construction chain as well as on the lien agent; (3) serve the Subrogated Claim of Lien on the contractor, the owner, all above it in the construction chain and the lien agent, in addition to filing the same; and (4) file the lien enforcement action within 180 days of last work by the contractor. The statute has been clarified to provide that a contractor can cut off the subrogated claim by cancelling its contractor's lien rights before a lien enforcement action is filed, but this does not affect the subcontractor's lien on funds. The amendments clarify that, for these subrogated liens, the subcontractor may use either the subcontractor's dates or the contractor's. The amendments also make clear that second and third tier subcontractors cannot assert a subrogated lien if the owner, within 30 days of the contract award, posts and files a Notice of Contract, and there is no service by the second or third tier subcontractor of a Notice of Subcontract.
The new scheme seeks to limit claims against the property in the hands of new owners. A Claim of Lien can be perfected against a new purchaser only if: (a.) the lien agent received notice from the claimant not later than 15 days after its first furnishing; and (b) either the lien agent received the notice from the lien claimant prior to the date on which a deed to a bona fide purchaser is recorded; or the Claim of Lien is filed prior to the deed being recorded. Even if the Claim of Lien attaches to the new property, if the Claim of Lien is filed AFTER a deed of trust is recorded, it will be subordinate to the new deed of trust unless: (a) the Lien Agent received notice within 15 days of first furnishing;and (b) the Lien Agent received notice prior to the recordation of the deed of trust.
Contractors must provide a "contractor's project statement" to their subcontractors.
Subcontractors must provide the "contractor's project statement" to their subcontractors, and subcontractors below the first tier must serve a "Notice of Public Contract" on the contractor, as soon as possible.
The new changes require that, where a bond is required by law, a contractor shall provide each subcontractor with the following information: name of the project, address, name of contracting body, name of contractor, agent for service, name and address of principal place of business of surety. This is termed the "contractor's project statement." In turn, each subcontractor shall provide each subcontractor it engages with a copy of the contractor's project statement.
After receiving the "contractor's project statement," a subcontractor should serve a "Notice of Public Subcontract" on the contractor stating: Name and address, property description, description of subcontract, description of labor or materials. [Not applicable to claim of $20,000 or less.]. By doing so the subcontractor protects its right to recover on the bond. If he fails to do so, the subcontractor is at risk if a contractor complies with its obligations. A contractor must now provide a copy of the bond within seven (7) days of receiving a request, instead of 10 days. If the contractor complies, a subcontractor is limited to recovering for work or material within 75 days prior to giving notice of public subcontract. G.S. § 44A-27. The sooner the Notice of Public Contract is given, the further back in time the recovery right extends.