While the conservative approach is to rely on an experienced construction attorney to serve preliminary lien and bond notices for North Carolina construction projects, there are many subs and suppliers who prefer the DIY approach. I’m sure many of you do-it-yourselfers already rely on these web-based tools for facilitating your preliminary notices, but just in case, here are my three favorites:
Tag Archives: NC mechanics liens
I had the pleasure yesterday of attending the first of four meetings of the “House Committee on Mechanics’ Liens and Leasehold Improvements,” a non-standing legislative research committee of the North Carolina House of Representatives co-chaired by Representatives Sarah Stevens (R-Mt. Airy) and Dean Arp (R-Monroe). The Committee’s work is focused primarily on whether the state’s mechanics’ lien statutes should be tweaked to strengthen the lien rights of contractors performing work for project owners who lease, rather than own, the property being improved.
Current statutory law allows contractors to place a lien on so-called “leasehold estates” (see N.C. Gen. Stat. § 44A-7(7)), but as Raleigh construction attorney Henry Jones, counsel to the Carolinas Electrical Contractors Association and N.C. Association of Plumbing & Mechanical Contractors, explained, such liens, in practice, are “illusory,” for two reasons: (1) when the lease is terminated, so are any lien rights asserted against the tenant’s leasehold interest; and (2) a successful levy against a leasehold generally means accepting not only the lease’s benefits, but also its burdens, including the obligation to make rent payments.
The 2011 Pete Wall Plumbing decision of the N.C. Court of Appeals, which Research Division staff member Shelly DeAdder did a terrific job of summarizing, is a vivid example of how a contractor can be left holding the bag when a leasehold interest is terminated. As Representative Stevens put it, “Poor Pete Wall did the work, but didn’t get paid,” and the expiration of its lien rights when the leases at issue were terminated by the record owner represented an “unfair result.” Judge Steelman’s concurring opinion in Pete Wall Plumbing, while acknowledging the majority opinion “reaches the correct legal conclusion under the present state of our statutory and case law,” called upon our state legislature to “consider revising the provisions of Chapter 44A to prevent this unjust result.”
The big question for the Committee to consider over the coming weeks is this: under what circumstances might it be appropriate to permit a contractor performing a tenant improvement to place a mechanics’ lien on the record owner’s “fee simple” interest?
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.”
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.
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.
I commend to your reading the current issue of NC Construction News, which includes this feature article on public-private partnerships (“PPPs” or “P3s”). As those who regularly follow this blog know, I’ve dedicated a fair amount of cyber-ink recently to the utilization of P3s in the construction of public facilities (particularly highways); after reading the linked article, my thinking on the subject has coalesced around this admittedly simplistic notion: P3s have enormous potential for good, for bad and for ugly, and it likely will be up to the General Assembly to determine which of those adjectives ultimately will apply to this unique project financing and delivery system.