Dave Simpson of Carolinas AGC informs me that HB 1052, the study commission’s lien law revision bill, as well as SB 42, the most recent version of the “hidden lien” legislation, were approved this afternoon by the House of Representatives of the North Carolina General Assembly. Neither bill was amended prior to passage.
Senate action is still required before the bills reach Governor Purdue’s desk; I’ll keep you posted on developments.
Filed under Lien Law, Payment Bonds, State law, policy & news, Surety Law
The train is on the track, and there’s no slowing it down.That was the impression left on construction industry stakeholders after House Judiciary Subcommittee B approved Senate Bill 42 unanimously yesterday.
Although the bill was initially re-referred to the Finance Committee, that referral was subsequently withdrawn, and a quick scan of today’s legislative calendar suggests the bill will be considered by the entire House at 11:00 a.m. this morning (the House calendar is here; see bottom of page 2).
Filed under Lien Law, State law, policy & news
Image from Wikipedia Commons
Monday is upon is, the beginning of what is likely to be the penultimate week of the General Assembly’s 2012 short session.
As my regular readers know, I’ve been tracking two key pieces of construction-related legislation: the lien law revision bill recommended by a legislative study commission, and the bill advanced by the title insurance industry to address the “hidden lien problem.”
This post provides an update on where those two bills stand, and also reports on a third construction-related bill that hit my radar last week.
My May 23 post about proposed revisions to North Carolina’s lien laws mentioned that protection against “hidden liens” had been omitted from earlier versions of the bill, due to a concern that the issue required additional study prior to legislative action.
The title insurance industry, however, has other ideas.
In recent weeks, title insurers have ratcheted up the pressure for the issue to be addressed immediately, prior to the General Assembly’s adjournment of its “short session” at the end of this month. The legislation they are pursuing would make profound changes to the manner in which all potential lien claimants — architects, engineers, general contractors, subcontractors and suppliers included — would need to preserve their lien rights, before a claim of lien is ever filed.
This post provides background on the so-called “hidden lien problem,” summarizes the title insurers’ current legislative efforts, and identifies potential problems with their draft legislation.
Filed under Feature story, Lien Law, State law, policy & news
The California legislature is also in the process of tweaking its statutory scheme — see this blog post from the “Government Contracts Advisor” blog.
According to the post, California’s goal for these revisions is to “modernize, simplify, and clarify the law, making it more user friendly, efficient, and effective for all stakeholders.” Among other changes, it appears that California is standardizing industry lien waiver forms — much like the proposal the General Assembly is now considering. But it also appears that California is going a step further than North Carolina by requiring GC’s to file preliminary notices to lenders, ostensibly to address the “hidden lien” problem discussed in my blog post yesterday.
Interesting stuff. Again, I will continue to keep you posted on developments with North Carolina’s ongoing legislative efforts.
Filed under Lien Law
Legislation revising North Carolina’s mechanic’s lien law was filed in both the House and Senate sides of the N.C. General Assembly yesterday. Text of the legislation can be found here.While not the ambitious rewrite that members of the construction bar and real property bar had envisioned when the process of revising the statutory scheme began a few years ago, the pending legislation would make several important changes to existing mechanic’s lien law, while leaving a couple other significant issues for future legislative effort.
Click “Continue reading” below for my thoughts on the five most significant proposed changes embodied by the current revisions — as well as my thoughts on the top two “non-changes” to existing law.
Filed under Feature story, Lien Law, State law, policy & news
Back in the Summer of 2009, the entire North Carolina construction industry, particularly us construction lawyers, were shocked by a series of decisions handed down by the U.S. Bankruptcy Court for the Eastern District of North Carolina that essentially prevented subcontractors and suppliers from serving claims of liens upon funds up the contractual chain once an entity higher on that chain had filed for bankruptcy protection. Nearly three years later, and in a surprise move that should come as welcome news to a wide swath of the contracting community (and particularly to subs and suppliers), the same court reversed course last Wednesday, and is once again permitting notices of claims of liens upon funds to be served despite the automatic stay provisions of federal bankruptcy law.
I’ll have more analysis in the days ahead. In the interim, rest assured that the In re Mammoth Grading and the In re Harrelson Utilities decisions are for all intents and purposes no more. To read the Order of Judge Randy Doub reversing course, click here.
Filed under Federal case law, Lien Law
Here’s a fact pattern worthy of a bar exam question:
A Trust intends to convey to Developer a 100%, undivided fee simple interest in a tract of land (for the non-lawyers, Trust seeks to convey the whole kit-and-kaboodle to Developer). Unfortunately, whoever prepares the deed effectuating this transaction is a tad sloppy, and mistakenly describes the estate conveyed as a “one-half fee simple interest,” rather than the full, undivided interest actually intended by the parties.
Along comes Lender, apparently unaware of the scrivener’s error, who provides construction financing to Developer for planned improvements to the parcel. The loan is secured by a deed of trust, of course, which describes Lender’s collateral as Developer’s full, undivided interest in the parcel (which, unbeknownst to Lender, Developer does not actually have, at least not yet).
Contractor then begins making improvements to the parcel, under the belief that Lender has a first-position priority interest in the parcel that pre-dates Contractor’s commencement of work. Contractor, however, is completely unaware of the scrivener’s error in the deed from Trust to Developer.
In time, Trust and Developer realize the error and record a corrected deed. When Lender catches wind of what has occurred, it, too, heads to the Registry of Deeds, re-recording its original deed of trust on the parcel. Ultimately, Contractor alleges it’s been stiffed by Developer, files a claim of lien, and then files a civil action to enforce its mechanic’s lien rights. The action names Lender for the purpose of determining the relative priorities in the parcel, as Contractor seeks a judgment that its mechanic’s lien rights are superior to Lender’s deed of trust, at least with respect to the one-half undivided interest that was not originally conveyed from Trust to Developer. Which party stands higher on the priority ladder with respect to that one-half interest — Lender or Contractor?
Pens down, bar examinees!
Filed under Lien Law, NC case law
Fall is here, and in four short weeks, daylight savings time will “fall back” to eastern standard time. Many of us will mark the occasion by checking the batteries in our smoke detectors, getting a much-deserved extra hour of sleep, and then awakening to the harsh reality that darkness will arrive an hour earlier than the day before, and will continue to descend earlier and earlier until Old Man Winter is finally upon us. After enduring that chilling thought, we’ll walk through our respective homes and make sure all of our clocks, appliances and VCR’s (yep, I still have one) are set back an hour, to the proper time.
Filing a mechanics’ lien is a little bit like setting the clock back each Fall. Sure, the date stamp applied by the clerk of court upon docketing a Claim of Lien bears the date of filing, but the contractor’s security interest in the property actually “falls back” to an earlier point in time — specifically, the date of the contractor’s first performance as recited in the Claim of Lien itself. It is that date — and not the date of filing — that will establish the contractor’s priority in the property that is the subject of the contractor’s improvement vis-à-vis all other competing interests.
Or so we all thought, before the Business Court ruled in April 2010 that every partial lien waiver executed by a contractor in exchange for periodic payment effectively resets the date of first furnishing. In all candor, many of my fellow construction law practitioners and I were shocked by that result. Fortunately, order was restored this past July, when the Court of Appeals reversed the Business Court and held that a partial lien waiver does not affect a contractor’s place in the priority line. Still, the Wachovia v. Superior Construction case discussed in this Case Law Spotlight article should serve as a “check-the-batteries-in-the-smoke-detector” moment for all contractors across the State: now would be a good time to make sure the partial lien waivers you execute every month aren’t too overbroad. Details and analysis follow after the jump.
Filed under Feature story, Lien Law, NC case law
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