By Attorney Edward Jesson
In 2012, North Carolina’s mechanic’s lien statutes were overhauled. One of the biggest changes was the requirement for a lien agent to be appointed on certain jobs. We still frequently receive questions about lien agent requirements and what the consequences of a contractor’s failure to file a “Notice to Lien Agent” actually are.
Lien agents are only required on projects involving improvements to real property valued at over $30,000.00, except that a lien agent does not have to be designated for projects where improvements are being done to an existing single-family residential building, occupied by the owner, even if those improvements are valued over $30,000.00. That exception also applies if the contract is for the construction of accessory buildings where “the use of which is incidental to that residence.” Generally speaking, the appointment of lien agents is more prevalent in commercial construction projects but it is also sometimes necessary to designate a lien agent for residential projects. While designating a lien agent is generally the owner’s responsibility, there is a limited ability for “custom contractors” (as defined by the statute) to designate the lien agent on residential new construction projects as, presumably, custom contractors should be more familiar with these laws than the average home owner.
In order to fully protect its rights as a contractor to pursue a claim of lien on real property, a contractor must file a Notice to Lien Agent within 15 days after it first “furnishes labor or materials to the project.” While failing to file a notice to lien agent within 15 days is not necessarily fatal to any future lien claims, it may limit the contractor’s lien rights should it be necessary to file a lien at a later date. If a contractor fails to file a notice to lien agent and, prior to filing the notice or to filing a claim of lien on real property, the property is sold or otherwise encumbered, the contractor seeking to enforce its lien rights at a later date may have issues doing so. On the other hand, if a contractor fails to file a notice to lien agent and it then becomes necessary to file a lien, the contractor will likely be able to do so if the property has not been sold or otherwise encumbered.
It is important to note that the lien agent does not take place of the owner or upper tier contractor for purposes of service. Any claims of lien on real property or claims of lien on funds should be filed (where necessary) and served on the owner and any necessary contractors and/or suppliers.
It is best practice, in projects where lien agents are appointed, to file the notice of lien agent as soon as possible—even prior to beginning work. There is a portal to provide Notices to Lien Agents on LiensNC.com, but if you have any further questions, the attorneys at Jesson & Rains would be happy to help.
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Kelly Rains Jesson