The North Carolina Mechanics Lien Scheme

Like most states, North Carolina has laws allowing those who provide labor or materials or rental equipment to a construction project to “lien” the project in the event of non-payment.

While the general availability of filing a lien is a simple rule in North Carolina, it is more complex to determine how a party can file in the state.   The manner of filing a lien in North Carolina depends on the claimant’s role in the project.    We take a shot at explaining the North Carolina lien scheme in this post, and compare it to how liens are filed in other states like Washington and Louisiana.

Those Who Contract With The Owner:

Those who contract with the “owner” on a North Carolina construction project, and who are not paid for labor or materials, may file a “traditional” mechanics lien with the county recorder.

The lien must be filed within 120 days from the last date labor or materials are furnished to the project, and must follow other formalities required by statute.   These formalities are set forth in N.C. Gen. Stat. § 44A-12, which also provides a form to be used when filing.

This lien actually attaches to the property at controversy, affecting the property’s title.

Those Who Do Not Contract With The Owner:

The rules are a bit different for those parties to a construction project who do not contract with the owner.  Who are these parties?  Subcontractors, Second-Tier contractors and suppliers, Third-Tier contractors and suppliers, etc.

Unlike parties who contract with the owner (i.e. generals), lower tier contractors cannot file a ‘traditional’ lien.   Instead, these contractors protect their right to payment by serving a “Notice of Claim of Lien Upon Funds.”   The requirements for this notice is set forth in N.C. Gen. Stat. § 44A-19.

This notice does not affect a property’s title, and it is not filed with the county records.  Instead, it is served upon every party “up the chain” from the claimant.

So, for example, a first tier subcontractor would deliver notice of claim to the owner and the general contractor.

While a traditional lien provides a claimant a lien on the property, this type of lien provides the claimant only with a lien on the funds at controversy.   After receipt of the notice, if the owner or other party makes payments down the construction chain with funds that are liened (i.e. eventually belong to the claimant), the party who improperly made the payment will be personally liable to the claimant for payment.

If the party is the owner, the claimant may then file its notice with the country recorder.

Comparing with Other States:  Louisiana and Washington

One of the problems with lien statutes across the country is balancing the rights of laborers and materialmen to get paid with the interests in protecting a property owner from being required to pay for the services twice, and to have its property title illegiatemly affected.

Different states balance these issues differently.

In Washington, lower-tiered contractors are required to provide the owner with notices prior to filing a lien.

In Louisiana, there is a focus on the public records, allowing owners to file notices in the public records that affect the interests of lien claimants.

North Carolina balances these issues differently, essentially allowing only those who contract with the owner to immediately affect a property owner’s title.  If the contract is not with the owner, the lien at first only affects the funds.  If the parties continue to refuse the claimant payment, the problem grows, and more parties become personally liable for the debt and the property’s title is at stake.

Express Lien’s Services:

Express Lien prepares, files and serves both “Liens’ and “Notice of Claim of Lien Upon Funds” in North Carolina.

With regard to “Liens,” filed by those who contract with the property owner, there is a $295.00 flat charge which includes the document preparation, filing and service upon interested parties.

With regard to “Notice of Claim of Lien Upon Funds,” this too has a flat lien charge of $295.00.   Since most of these notices require multiple documents and multiple services (one on each party up the chain), Express Lien discounts the additional liens required.   The first “Notice of Claim of Lien Upon Funds” is $295.00, each additional lien for the same project is $105.00.

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