If contractors and suppliers are not compensated for their work on a construction project in North Carolina, they have the option to file a mechanic’s lien to ensure payment. A mechanics lien grants the unpaid party a security interest in the property as a legal recourse.
At CRM Lien Services, we specialize in ensuring that you get paid quickly and reliably. We can prepare and file mechanics liens for you, taking into account Mechanics Lien North Carolina and state-specific rules and regulations.
This page details the regulations, necessary procedures, and deadlines essential for filing a North Carolina mechanics lien.
Key Takeaways
- In North Carolina, anyone involved in furnishing labor, materials, or professional services directly to a property can file a mechanics lien. This includes direct contractors as well as subcontractors down to third-tier, with varying rights and procedural requirements.
- To file a mechanics lien, it’s essential to act within 120 days from the last provision of labor or materials. Although there’s no strict deadline for claims on funds, timely action is recommended to ensure funds are available for recovery.
- Successfully filing a mechanics lien requires not only filing with the Clerk of Superior Court but also serving notice to the property owner—and in some cases, the general contractor. This dual requirement ensures the lien is perfected and enforceable.
- Obtaining lien waivers from potential lien claimants is crucial to ensure that the property is conveyed free from any hidden liens, thereby protecting the buyer and preserving the contractor or subcontractor’s lien rights.
Who Can File a North Carolina Mechanics Lien with a Lien Agent?
In North Carolina, the right to file a claim of lien on real property extends to “any person who performs or furnishes labor or professional design or surveying services, or furnishes materials or rental equipment under a contract with the property owner for improvements.” However, for subcontractors, navigating lien rights can be complex.
It is important to serve a notice to the lien agent to preserve a contractor or subcontractor’s lien rights and potential contractual rights against the former owner of the property. Properly serving a notice on the lien agent prior to delivering materials or providing services is essential to protect the contractor or subcontractor’s interests.
Eligible parties for filing a real property lien include:
- Parties contracting directly with the property owner.
- First-tier subcontractors, provided they adhere to all required procedures.
- First, second, or third-tier subcontractors if they meet the criteria for a claim against funds and if the owner pays the general or a higher-tiered subcontractor without reserving enough to cover the liens.
- Second or third-tier subcontractors and suppliers can claim through subrogation of the general contractor’s lien, even if the first-tier has been paid, provided the owner still owes the general contractor who has lien rights. This can be limited if the general contractor files a notice of contract and the lower-tier subcontractors do not serve a notice of subcontract or if, after both notices are given, the general contractor provides written notice of payment within five days of receiving payment. A recent case also expanded mechanics lien rights for design professionals.
For claims on funds, a subcontractor can lien the funds owed to their immediate contractor and may adopt that party’s claim through subrogation.
Subcontractors beyond the second tier generally cannot subrogate to the claims of higher-tier subcontractors.
A claim against funds cannot be filed if no funds are owed to the higher-tier party when the lower-tier party files their claim.
A recent North Carolina Court of Appeals decision added complexity by invalidating a lien filed by parties initially contracted with a non-owner who later became the property owner. For lien eligibility, it’s now essential to contract with someone holding a current interest in the property being improved.
When Is the Deadline to File a North Carolina Mechanics Lien?
In North Carolina, a mechanics lien must be filed within 120 days of the last date labor or materials were provided to the project, which should occur after the debt is due. Notifying the lien agent is crucial to preserve lien rights and must be done within the specified timeframe.
For claims upon funds, there isn’t a strict deadline for submission. Nonetheless, it’s advisable to submit a claim of lien upon funds sooner rather than later. This claim obligates the payer to reserve funds for the claimant’s benefit. However, if no funds remain in the project budget by the time the claim is made, recovery by the claimant may not be possible.
Do I Need to Send Notice That the Lien Was Recorded?
Yes. A claim of lien on real property must be served on the property owner and filed at the Office of the Clerk of Superior Court in the county where the property is situated. Additionally, a subcontractor is required to serve a copy of the lien on the general contractor. The mechanics lien is considered perfected only after it has been both filed and served on the property owner and, if applicable, the general contractor.
This process must be completed within 120 days from the last date labor and materials were provided to the project. Notifying the lien agent about potential lien claimants is crucial for alerting property owners and potential purchasers about the possibility of future lien claims from contractors or subcontractors if they are not paid for their work or materials.
For a claim of lien on funds, although filing is not necessary (unless it accompanies a lien on real property), it must be sent via certified mail to the entities higher in the contractual chain than the claimant. If the party obligated to pay is a corporation, the claim should be directed to an officer, director, or managing agent.
Can Attorney’s Fees, Collection Costs, or Additional Charges Be Included in the Lien Amount?
No. The value of a mechanics lien in North Carolina is based on the unpaid cost of labor, materials, and equipment provided to the project. Interest, indirect, or consequential damages cannot be included in the lien amount. However, attorney’s fees may be awarded to the winning party if the judge determines that the losing party unreasonably refused to settle the dispute.
Consulting a law firm can provide valuable guidance and assistance in ensuring that the lien amount is accurately calculated and legally enforceable.
Does a North Carolina Lien Take Precedence Over Existing Mortgages or Construction Loans?
In North Carolina, a mechanics lien typically takes precedence over other property encumbrances that arise after either the lien is filed or the Notice of Commencement is issued, whichever occurs first. There is, however, some debate over whether a contractor’s mechanics lien on real property or a bank with a construction mortgage has priority in a foreclosure situation.
A lien agent, often a title insurance company, is designated to receive notices to lien agents as required by North Carolina law when an owner contracts for work of at least $30,000.
Can I File a North Carolina Lien on a Condominium Project?
Yes, a mechanics lien can be filed on a condominium project if the lien claimant possesses valid mechanics lien rights.
Who Cancels the North Carolina Lien When I Get Paid?
In North Carolina, there is no explicit rule specifying who must release a lien once the underlying debt is settled. The record lien claimant, or their agent or attorney, can acknowledge that the real property lien has been satisfied. Alternatively, the property owner can present a satisfaction document signed and acknowledged by the record lien claimant, indicating that the real property lien debt has been paid or resolved.
Essential Things to Know About North Carolina Mechanics Liens
North Carolina’s mechanics lien laws offer significant protections for contractors and suppliers, but they come with numerous requirements that construction participants must meet to qualify for, secure, perfect, and enforce their lien rights. All procedures and requirements for filing and enforcing mechanics liens must be in accordance with North Carolina law.
3 Types of Mechanics Lien in North Carolina
North Carolina offers three distinct types of liens for construction projects within the state, each tailored to different roles within the construction industry:
- Claim of Lien on Real Property: This lien type is primarily for individuals who contract directly with the property owner, such as general contractors, independent contractors, or design professionals. It’s the traditional form of a mechanics lien but is typically the least accessible for subcontractors in North Carolina.
- Notice of Claim of Lien Upon Funds: This lien is specifically for subcontractors, including those down to the third tier, enabling them to claim a lien on any funds due to their contractor in the chain of title. For example, if the property owner still owes money to the general contractor, and a subcontractor issues a Notice of Claim of Lien Upon Funds, the owner must resolve the subcontractor’s lien before settling accounts with the general contractor.
- Subrogated Claim of Lien on Real Property: This type extends real property lien rights to subcontractors, but only to the extent that their contractor (the party who hired the subcontractor) possesses lien rights. This allows subcontractors to step into the shoes of the contractor in terms of lien rights on the property.
The lien rights are tied to the improvements made to the owner’s property and must be properly documented to be enforceable.
These lien types reflect North Carolina’s approach to maintaining a balance of protection and obligation among different parties involved in construction projects.
How to File a Mechanics Lien in North Carolina?
In North Carolina, the construction industry often grapples with delayed payments and non-payment issues. If you find yourself unpaid for construction work in North Carolina, you likely have the right to file a mechanics lien. Consulting North Carolina construction attorneys can provide valuable assistance in navigating the complexities of filing a mechanics lien.
The mechanics lien North Carolina process, while effective, can be intricate and confusing. This guide explains and outlines the necessary steps to file a lien and secure payment.
Steps to File a Mechanics Lien in North Carolina:
- Complete a Mechanics Lien Form: Begin by filling out a mechanics lien form that complies with North Carolina’s specific requirements. Accuracy is crucial, as any error can complicate or invalidate the process.
- File the Lien: File your completed lien form with the county recorder’s office in the county where the property is located. This step is vital for the official record.
- Serve the Lien: You must serve a copy of the lien on the property owner. If you are a subcontractor or supplier, you must also provide a copy of the general contractor. This step is essential to perfect your lien claim.
Key Considerations and Requirements:
- Timing is Crucial: You have 120 days from your last day of furnishing labor or materials to complete these steps.
- Detailed Information Needed: The lien claim must include the claimant’s name and address, the property owner’s name and address, a property description, and details of the services or materials provided.
- Filing Location: Physically file the lien in the Office of the Clerk of Superior Court in the relevant county.
- Service Requirements: Ensure the property owner and possibly the general contractor, receive their copies of the lien.
Timeline and Enforcement:
- Enforcement Window: A North Carolina mechanics lien is enforceable for 180 days from the date of the last furnishing of labor or materials.
- Notice of Intent to Foreclose: Before pursuing a lien enforcement action, consider sending a Notice of Intent to Foreclose. This can act as a powerful incentive for resolution before legal action is required.
Understanding who can file a lien, the necessary notices, and timing requirements can be complex.
A mechanics lien is a powerful tool in the construction industry for securing payment, and while it’s best to resolve disputes without liens, knowing how to effectively utilize this legal option is crucial for any construction participant facing payment issues.
Get in Touch
In North Carolina, contractors and suppliers can secure payment through mechanics liens if unpaid for construction work. CRM Lien Services specializes in efficiently preparing and filing these liens, adhering to all state-specific regulations.
We have been serving customers across the country with required reference documentation for lien claims since 1986. We assist property owners in navigating the mechanics lien process, informing them about their rights and responsibilities, including providing notices, securing payment, and releasing mechanic’s liens. We have a wealth of expertise, are licensed and insured, and have a team of highly knowledgeable document processors.
If you’re looking for a straightforward process for filing a mechanics lien, give us a call or shoot us an email. A closing attorney plays a crucial role in confirming clear title and ensuring that potential liens have been waived or that the buyer is aware of the risks, as North Carolina law requires.
We would love to work with you and help you lower your risk and get paid fast!
