On April 1, 2013, new legislation enacted by the North Carolina General Assembly took effect which made substantial changes to North Carolina’s previous lien law statutes. Under the new lien law, our business clients must make significant changes to their previous practices to preserve and protect their rights to liens on jobs as suppliers of materials of as subcontractors providing labor, materials or equipment to a job site in North Carolina. Failure to make changes to existing lien practices may seriously impact our clients’ lien rights.
Under the new law, a subcontractor or supplier is required to serve notice of a potential claim to the “lien agent” no later than fifteen days after the first furnishing of material in order to fall within the statute’s safe harbor period. The lien agent is to be identified by the owner on the building permit or provided in response to the supplier’s request. A lien claimant who fails to serve the notice of a potential claim upon the lien agent within the fifteen day period will lose their lien rights unless they file a lien with the Clerk of Court before a sale or refinancing concerning the property occurs, or if they serve a notice of lien to the lien agent before the sale or refinancing. This is an attempt to avoid the problem of materialman’s liens being “hidden liens” under the pre-April 1, 2013 law since a lien can be filed up to 120 days after the last furnishing without any prior notice.
The new law also requires a contractor or subcontractor to provide suppliers with written notice containing the identification and contact information for the lien agent. This notice must be served within three business days of contracting with the supplier. If a subcontractor or supplier fails to supply this notice, this can create liability for the supplier’s damages if the supplier loses its lien right as a result of failure to supply the contact information for the designated lien agent. Further, an owner is required to similarly provide the contact information for a lien agent within ten days of any written request by a potential lien claimant.
Because of these new short periods of time to serve notice of potential claim upon the lien agent, we recommend that our clients establish firm practices to send written requests for identification of the lien agent to the contractor or subcontractor with whom they deal. Evidence of these requests should be preserved as proof that the request for the lien agent identification was sent. In some cases, our clients may want to forward this notice to the owner who, likewise, is under a requirement to identify the lien agent. As a backup, we also recommended that our clients check with the County’s Building Inspection Department and check the issued building permit for the identity of the designated lien agent. In cases under $30,000.00, for which a building permit may not be required, then the new law entitles potential lien claimants to obtain the information from the owner. We do not recommend that our clients rely on the potential liability of the contractor or owner in failing to provide this since an unsecured claim to damages will be less powerful than a right to file your lien.
We recommend to our clients that they provide this information to their sales personnel or other employees that have the most contact with owners, contractors and subcontractors, and that they take all steps to make written requests for identification of the lien agent and to provide appropriate notice of the potential claim to the lien agent within the fifteen days. See Section 44A-11.2(a) for a form for the notice of potential claim to the lien agent.
Of course, this new law is simply an additional condition on the existing right to file a lien within the 120 day period, and to perfect the lien by a lawsuit within the 180 day period. Our clients should continue to keep these deadlines in line after they have filed the notice of potential claim with the designated lien agent within the fifteen days of the first furnishing.
We encourage anyone with questions about the operation of this new lien law to contact the experienced business attorneys at Richard L. Robertson and Associates, P.A. for guidance.