If you’re a prime contractor on a private, commercial construction project, your contract with the owner likely includes a provision requiring you to bond off or otherwise dispose of real property liens filed by your subs & suppliers. And if you’re a prime contractor on a bonded public project, the agreement of indemnity between you and your bonding company makes you ultimately responsible for any bond claim the surety might pay.
Either way, you’re exposed to financial loss arising from the lien & bond claims of second-tier and more remote subs & suppliers, even if you faithfully pay your first-tier subs each and every time payment is due.
So what can you do about the risk of double payment in North Carolina?
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In most cases, the “owner” of a tenant improvement project is NOT the record owner of the real property, but rather the tenant who entered into the contract for the improvement.
That distinction can be critical when perfecting and enforcing mechanics liens in North Carolina.
Take, for example, the fireproofing contractor who asserted a mechanics’ lien enforcement action against both the landlord and the tenant of a leased premises in yesterday’s unpublished Court of Appeals decision in Century Fire Protection, LLC v. Heirs.
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Meeting lien and bond claim filing deadlines can sometimes feel like a race against the clock. For claimants who provide on-site labor for a construction project, properly identifying the date such labor was last furnished is a critical component to winning that race.
An unpublished Fourth Circuit Court of Appeals decision illustrates the point. In U.S. ex rel. Mavis Mechanical Services, Inc. v. Hanover Ins. Co., 182 F.3d 910 (4th Cir. 1999), a subcontractor on a federal construction project tried to establish compliance with the Miller Act’s one-year filing deadline by arguing it furnished labor on two occasions within a year of its lawsuit. The first instance involved attendance at a coordination meeting; the second involved mobilization to the site to perform certain valve installation work it had yet to complete, but refusal by the sub to actually perform the work when the GC refused to make payment on alleged past due amounts. On these facts, the Fourth Circuit upheld the district court’s determination that neither site visit qualified as “labor” for the purposes of the Miller Act’s one-year filing deadline. That holding doomed the sub’s Miller Act claim to dismissal.
The moral of the story?
In the second of four meetings, the House Committee on Mechanics’ Liens and Leasehold Improvements of the North Carolina General Assembly heard from representatives of the banking and commercial real estate industries on Monday, February 3. Both representatives spoke forcefully against extending liens for tenant improvements to the record owner’s underlying interest in the leased property improved. (For context, you can find my coverage of the committee’s initial meeting here).
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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
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
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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.
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.
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.
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.”