Tag Archives: lien waiver

CASE LAW SPOTLIGHT: Court of Appeals Holds That Partial Lien Waivers Do Not Reset The Date-of-First-Furnishing Clock

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.

Continue reading

Leave a comment

Filed under Feature story, Lien Law, NC case law