A couple of weeks ago, I posted my thoughts about the N.C. Court of Appeals’ recent decision in Ramey Kemp & Associates, Inc. v. Richmond Hills Residential Partners, LLC et al., which held that an engineer’s preparation of a project status update letter constituted what I call a “lienable activity,” i.e., an event sufficient to trigger the 120-day deadline for filing a mechanics’ lien under N.C. Gen. Stat. § 44A-12(b). In light of the Ramey Kemp decision, general contractors might well ask themselves, “Gee, if an engineer’s project status letter is a lienable activity on a construction project, how about the close-out paperwork I’ve gotta provide under my contract, particularly as-builts?” Good question. Continue reading
Category Archives: Lien Law
Is As-Built Drawing Preparation a Lienable Activity?
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Will QR Code Technology Provide Contractors Quick Relief in Filing Preliminary Lien Notices?
Ever since its passage last summer, North Carolina’s so-called “lien agent statute” has caused much consternation throughout the commercial construction industry, with many contractors, subs and suppliers worried that it will be inconvenient and expensive for them to comply with the statute’s various requirements (which I’ll be discussing in detail as my “Lien & Bond Law Revolution” series continues in the weeks ahead). The title insurance industry, however, has tried to assure leery potential lien claimants that an online application will make filing preliminary lien notices convenient and inexpensive.This week, we’ll get down to where the rubber meets the road on that assurance. Continue reading
Filed under Events, Lien Law, State law, policy & news, Subcontractors
N.C. Court of Appeals Fleshes Out the Scope of Design Professionals’ Mechanics’ Lien Rights
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The North Carolina Court of Appeals (“COA”) this morning issued a 33-page opinion clarifying the types of professional engineering services entitled to a claim of lien under North Carolina’s mechanics’ lien statutes. One of the three COA judges, however, issued a dissenting opinion, which means further review by the North Carolina Supreme Court could be in the offing. This post explores the facts of Ramey Kemp & Associates, Inc. v. Richmond Hills Residential Partners, LLC et al., discusses the majority and dissenting opinions, and comments on the important points to take away from the decision.
Filed under Design Contracts, Feature story, Lien Law
Why I Support Limiting North Carolina’s Lien Agent Statute to Residential Construction Projects
Photo Credit: Marietta Daily Journal
This afternoon I attended the first lien law “Stakeholders’ Meeting” of the North Carolina General Assembly’s 2013 Regular Session. The purpose of today’s meeting was to give folks in support of and opposition to proposed legislation that would limit the state’s new lien agent notice requirements to one- and two-family dwelling units 30 minutes per side to argue their respective cases.
I spent just under ten minutes of the “pro” side’s time making an argument that I’ve memorialized in the letter attached, below. To read a larger version of the letter, click the expand button in the lower right-hand corner of the Scribd application.
This issue is still very much ripe for discussion, and so I invite and value your comments.
Filed under Lien Law, State law, policy & news
N.C. Liens/Bonds, They Are A-Changin’ Part II: The (Bankruptcy) Fix Is In
Back in 2010, when a group of construction, real property and bankruptcy lawyers first started meeting to consider potential revisions to North Carolina’s lien and bond statutes, one of the driving forces behind those discussions — particularly for those who typically represent subcontractors and suppliers — was protection for downstream project participants after an upstream player filed for bankruptcy. Such protection, known commonly as the “Bankruptcy Fix,” was included in the package of revisions signed into law last summer. This post explores the origins of the Bankruptcy Fix and discusses how the 2012 lien law legislation protects the right of subs and suppliers to serve a Notice of Claim of Lien Upon Funds even after a party above them in the contractual chain files for bankruptcy.
N.C. Liens/Bonds, They Are A-Changin’ Part I: “Perfecting” Liens Under the New Regime
As 2012 draws to a close — faster than many of us can believe — the dawn of a new era under North Carolina’s mechanic’s lien and bond statutes quickly approaches. And that means it’s high time for me to end my brief blogging hiatus with a series dedicated to helping construction industry participants throughout the state understand the changes that are rapidly coming down the pike.
By way of brief recap, legislation protecting general contractors from double payment liability on public projects and legislation protecting title insurers from “hidden liens” on private projects made splashy headlines this past summer. I’ll be delving into the nuts and bolts of those significant changes as this series continues. This post, however, is dedicated to addressing a less-publicized, but no less substantial, alteration to the lien law that every potential lien claimant will need to bear in mind in 2013, and beyond: the process by which lien rights are “perfected.”
Filed under Feature story, Lien Law, State law, policy & news
Court of Appeals: Contractors’ Lien Claim Properly Dismissed Where “Owner” Owned Nothing on Date of 1st Furnishing
In a controversial 2-1 decision released October 2, 2012, the North Carolina Court of Appeals (“COA”) affirmed a trial court’s dismissal of a mechanic’s lien claim asserted by contractors who did not have a contract with the “Owner” of the improved real property as of the date of first furnishing — even though the “Owner” ultimately acquired title to the land during the course of the contractors’ performance.
Photo credit: tvland.com
The John Conner Construction, Inc. v. Grandfather Holding Co., Inc. decision is significant to the construction industry because it limits the reach of the term “Owner” as that term is used in North Carolina’s mechanic’s lien statutes. Since there was one dissenting vote from the three-judge panel, however, the case is likely to be reviewed by the N.C. Supreme Court, which could elect to expand who qualifies as an “Owner” for the purposes of the lien law.
A full exploration of the facts, holding, dissent and practical implications of the John Conner Construction decision follows:
Filed under Feature story, Lien Law, NC case law, State law, policy & news
Barnstorming Tour on Revisions to North Carolina’s Lien and Bond Laws Kicks Off Tomorrow In Durham
I’m excited to be one of five North Carolina lawyers participating in a series of seminars sponsored by CarolinasAGC aimed at helping the construction industry understand the significant lien and bond revisions passed by the General Assembly and signed into law by Governor Perdue earlier this summer.
Over the coming weeks, CAGC is sponsoring five such seminars in Durham, Wilmington, Greensboro, Charlotte and Asheville. CAGC’s website describes each seminar as follows:
This two hour seminar will cover the major, recently enacted revisions to North Carolina’s lien and public bond law statutes. House Bill 1052 and Senate Bill 42 were signed into law this July, and will take effect respectively in January and April 2013. The new laws substantially modify the steps that all parties will have to take to protect their interests — regardless of whether they are an owner, buyer, contractor or sub/supplier. In particular, the new laws impose significant new notice requirements for both public and private work. This seminar will be taught by attorneys that were intimately involved in passing the legislation and will cover in detail what the changes are and what you’ll need to do to protect your interests starting in 2013. Attendees will receive a written summary of the lien laws as amended and a copy of the Power Point
presentation presented and have ample opportunity to ask questions from the presenting attorneys.
Filed under Events, Lien Law, Payment Bonds, State law, policy & news, Surety Law
UPDATED: Lien Law Revisions Bill Cruises Through State Senate, Followed by “Hidden Lien” Legislation
Most recent update: Thursday, June 28, 2012 9:22 p.m.Both the lien law revisions bill and the “hidden lien” legislation sought by the title insurance industry flew through the N.C. Senate yesterday with flying colors.
The lien law revisions bill (House Bill 1052), which among other things would (1) provide “double payment” protection for general contractors under North Carolina’s public payment bond statute and (2) permit subs and suppliers to serve a Notice of Claim of Lien Upon Funds even after a party above them in the contractual chain files for bankruptcy protection, passed unanimously 49-0, with one Senator not voting.
The bill was amended prior to the vote to remove treble damages liability for misrepresentations made in lien waivers. I was listening to the Senate’s deliberations on the amendment, and Senators Brunstetter, Clodfelter, Tillman and Nesbitt all spoke about the dangers of introducing potential unfair and deceptive trade practices liability into a construction project’s payment cycle. The amendment was unanimously approved by the House on Thursday, June 28. The revised bill, as amended, can be found here.
The hidden lien legislation (Senate Bill 42), which among other things would require potential lien claimants to preserve their lien rights by providing a “Hi, I’m here” pre-notice to the project owner’s designated lien agent on residential and commercial projects, also passed unanimously 49-0, but not without some heartburn. In particular, Senator Tommy Tucker of Waxhaw spoke about how the legislation was only before the General Assembly “under a veiled threat” by the title insurance industry, thereby representing a “you’d better!” bill that would leave subcontractors “holding the bag again.” He expressed his support for the bill since the homebuilding industry supported it, but expressed his desire that the General Assembly re-visit the legislation early in the 2013 session to improve it before its April 1, 2013 effective date.
The version of SB 42 passed by the Senate contained several revisions to the version passed in the House on June 21. In the intervening week, a group of construction industry stakeholders — yours truly included, in the interest of full disclosure — worked to propose several modifications that would remove some of the rough edges from the House-passed bill. Those proposed modifications included the following:
- The requirement of pre-notice will not apply where the improvements in question are to be made to an existing single-family residential dwelling unit that is used by the owner as a residence.
- The failure to provide lien agent information to a supplier not expected to perform on-site labor will not result in triple damages exposure under North Carolina’s unfair and deceptive trade practices statute.
- Higher tiered contractors will no longer be able to cut off the lien rights of lower tiered contractors through lien waivers once the lower tiered contractor (1) files pre-notice to the lien agent and (2) serves a notice of claim of lien upon funds up the entire contractual chain and upon the lien agent (under existing law, a higher tiered contractor’s ability to waive the rights of lower tier contractors is only shut off when the lower tiered contractor files a lien enforcement action in court).
- Where a lien agent is not designated prior to the provision of design services by an architect or engineer, the design professional will be deemed to have met the requirement of pre-notice upon the owner’s designation of the lien agent.
These modifications and others are contained in a conference report that was adopted by both the House and Senate yesterday that you can find here. Legislative action on the hidden lien bill is complete, subject to the bill potentially being “tweaked” early in the next legislative session.
Both bills are on their way to Governor Perdue for her approval, which is expected before the end of the month.
Many thanks to Representative Sarah Stevens of Mount Airy for reaching out to me yesterday with news of these developments, and for all of her efforts in shepherding these important bills to the finish line.
Filed under Lien Law, Payment Bonds, State law, policy & news, Surety Law
“Who Are You?” To Preserve Lien Rights Against Owners, Get the Right Answer to that Question!
Image courtesy Sam Killermann / samuelkillermann.com. Lyrics from “Who Are You” by P. Townshend (c) 1978.
I’m psyched to present another guest blogger this week: Lewis & Roberts construction & surety law associate extraordinaire, Jessica Bowers. It’s been my distinct pleasure to work with Jessica since she joined L&R in October 2010. Jess has represented owners, developers, GC’s and subs, and her practice has seen an increasing emphasis on serving the needs of surety companies. A member of the State bar since 2005, Jess was a recipient of the bar’s Pro Bono Public Service Award that year.
If you’re like me, you might find yourself softly singing the catchy chorus from the Who’s “Who Are You” as you consider the North Carolina Court of Appeals’ June 5, 2012 decision in Young & McQueen Grading Company, Inc. v. Mar-Comm & Assocs., Inc. et al.
The case involved a good deal of confusion regarding the correct identity of the owner of a construction project, confusion that complicated the contractor’s assertion of its mechanic’s lien rights against the owner’s property.
Rest easy, the contractor ended up prevailing and holding on to its lien rights. But it sure wasn’t easy! The decision reminds us how critical it is at the beginning of a project to determine the correct identity of the owner of the improvement by obtaining an accurate answer to one simple question:
Who are you?
Filed under Feature story, Lien Law, NC case law
N.C. Construction Law, Policy & News 