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:

For those who do not contract with the property owner, the North Carolina lien scheme offers two possible remedies.

First, a “Notice of Claim of Lien Upon Funds” is something that is delivered – and not filed – to parties “up the contract chain.”   This requires those up the chain to put a freeze on funds that may be due the claiming subcontractor.    If a Notice of Claim of Lien Upon Funds is delivered to the Owner, and the Owner thereafter disburses funds to the general contractor, the claimant can then escalate its notice into an actual lien.

Second, a “Subrogation Lien” is filed by a sub or lower-tier sub within 120 days from when the general contractor last performs work, and may be filed only if a Notice of Claim Upon Funds was delivered to the Owner and some amount of money is due to the GC from the Owner.

Both of these lien remedies are discussed below in this post.

Claim of Lien Upon Funds

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.

Lien Through Subrogation

In addition to the “Notice of Claim of Lien Upon Funds,” subcontractors and lower-tiered subcontractors can also file a mechanic’s lien against the property through “subrogation” of the general contractors right to lien.

With this type of lien, the lien claimant must:  (1) have served a Notice of Claim of Lien Upon Funds to the property owner; and (2) the general contractor must be owed money from the owner.    The subrogation lien must be filed within 120 days from when the general contractor last furnished labor and/or materials to the project.

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.   Also, liens that are recorded by subs and those who did not contract with the owner are also $295.00.

With regard to “Notice of Claim of Lien Upon Funds,” which are delivered and not filed, these are considered a notice, and are charged our low flat fee for preparing and delivering notices.

Get Started Now.

What To Do If Your Lien is Challenged?

After you file a mechanic’s lien, parties who have interest in the project may ignore the claim, pay the claim or challenge the claim.

If they ignore the claim, you can of course file a lawsuit to enforce it.  If they pay the claim, you’ll likely next be required to cancel the lien.   This post discusses the third possibility, the circumstance of when someone challenges your lien.

Why A Lien May Be Challenged

Lien statutes are complex and hyper-technical, and if you file a mechanic’s lien without authority to do so or even with the slightest error, an interested party (i.e. owner or general contractor) may challenge your lien.

Here are some of the most common reasons liens are challenged:

•  It was filed past the lien deadline
•  The lien was filed by a party who was required to send preliminary notice, and didn’t
•  The lien does not contain a legal property description

How It’s Challenged (What Happens)

In most circumstances, the challenging party will send you a letter highlighting the defects in your lien, and make a formal request that you cancel the instrument. If you refuse to cancel the lien voluntarily, the party may petition a court to force the removal of the lien.

In some states (like Louisiana, California) if liens are improper and the claimant refuses to voluntarily cancel it, the claimant may be liable to the challenging party for attorneys fees and legal expense incurred in the challenge. Some states do not allow this recovery, and some states – like Washington – will award attorneys fees to the victor of a challenge (whether it be the claimant or the challenger).

If My Lien Is Challenged, Is It Improper?

The answer to this question is “not necessarily.” When a property owner or general contractor retains counsel regarding a construction lien, one of the first things that attorney will do is send a threatening letter that the lien is “improper.” These letters sometimes take liberties with the law and its requirements.

Furthermore, in most states, a challenge in court of an improper lien will consider only procedural or technical errors with the lien, and not necessarily whether the parties performed under the contract.

In other words, in determining if a lien is proper the court may not consider whether each party properly performed under the contract. Instead, the court is concerned about whether the lien notices were sent, the lien contents are technically correct, etc.

Remember that just because you receive a letter from an attorney does not mean that your lien is invalid. Here are some common mistakes made in letters or petitions challenging a lien:

•  Challenge to the lien alleges that claimant did not perform under the contract (i.e. workmanship flaw, unauthorized change order, etc.) only;
•  Person (even if an attorney) drafting letter challenging lien does not understand the lien statutes;
•  Rules are quoted that may not apply to the particular claimant or project

If My Lien Is Challenged, What Do I Do?

If your construction lien is challenged, you have a number of options.

• You can retain or engage an attorney to represent your interests against the challenging party. If allowed in your jurisdiction, you may also represent yourself pro se in support of your lien.

• Sometimes, unfortunately, a claimant may not be able to afford counsel, and may not understand the lien statutes. In these circumstances, you may cancel the lien instrument as requested by the challenging party. The simple cancellation of the lien instrument should not invalidate your right to sue the party who did not pay you (the party you contracted with).

I Got Express Lien to File My Lien – Why Is It Being Challenged

As a lien filing service, Express Lien prides itself on filing liens accurately and in accordance with the form for each state.

However, since Express Lien is a legal document preparation company and not a law firm, we do not guarantee or make any determinations regarding you or your company’s right to lien. So, for example, a lien filed with our service may meet all of the technical and formatting requirements, but may be improper because your company was not authorized to file the lien.

Furthermore, Express Lien files your legal documents with the information provided to us. As such, if incorrect information is provided, there are circumstances when your lien may be improper.

Washington Law Protects Contractors from Dangers of Frivolous Lien Statute

A quick word from the construction law case files:

The Court of Appeals, Division 1, out in Washington state, has refused to deem a construction lien as frivolous based upon the complexity of the construction contract at dispute. The court in SD Deacon Corp. of Washington v. Gaston Bros. Excavating, Inc., decided back in May of this year, that the state’s “frivilous lien” statute, coded under RCW 60.04.081, requires a more in-depth analysis of factual circumstances surrounding the substance of the contract and the lien.

The court in SD Deacon further reasoned that a court can only evaluate in a frivolous lien proceeding are, by way of example, whether the lien was properly filed, signed by the proper party, properly served, and meets the statutory form requirements. Issues of substance of the lien (i.e. the contract amount, amount due or change orders) are issues which require more substantive proceedings to analyze factual circumstances.

Because the frivolous lien procedure codified in RCW 60.04.081 does not provide for such proceedings, a party seeking to extinguish a lien filing will be unsuccessful in attempting to show to the court that the lien was frivolous.

Essentially, the court’s new rule is that the “lien must be so devoid of merit that the claim has no possibility of succeeding” and that “there must be findings supporting the conclusion that the lien is invalid beyond legitimate dispute.”

The Court’s ruling provides some hope for “fringe” contractors who’s claims hold some element of uncertainty, but who desperately need the security provided by a lien in order to collect payment from an uphill contractor or owner.

The frivolous lien statute was enacted to prevent fraudulent claims against contractors, by awarding successful parties attorneys fees. The ruling in the case shows that the award of fees will not be granted unless your lien fails to meet statutory form requirements.

Express Lien, Inc. has the knowledge and experience to meet these stringent requirements. Let us help you ensure your lien’s success!

What Are the Chances of Getting Paid After Filing A Lien?

In today’s economic climate, payment problems are plaguing construction projects.

Just recently, a prospective customer called us and asked:  what are the chances of getting paid after filing a lien?

Unfortunately, it’s impossible to provide a success percentage because each situation is different.

However, mechanics liens are far and away one of the most effective ways to secure payment for your company.

To put it simply then, we can only point out the obvious in response to this question.   The obvious answer is that filing a mechanics lien is a first, and oftentimes necessary, step to get paid on a problem project.

Without a recorded lien, your company is simply a bystander to the project’s payment obligations, and is pinning its company’s rights to payment on good fortune.

Filing a construction lien isn’t extraordinarily expensive, and it’s a step in the right direction for your organization.  Get to know the lien deadlines and laws for the state where you performed work, and then make a move to protect your company by securing your lien.

File a lien today and get payment to come your way!  Lien SMARTER…..to get paid.

Get Smarter With Lien Seminars from Express Lien

Is your company flat-out confused about the lien laws that apply to your projects?

Do you have collection problems and don’t know where to start?

Let Express Lien help.

Start 2009 on the right foot by having Express Lien come out to your company’s headquarters and talk with you and your employees about the liens laws that apply to your projects.

The two-hour presentation and Q&A session will be put on by one of our company’s founders, who are also construction attorneys in Washington and Louisiana.   The presentation will focus on the types of projects and situations encountered by your particular business, and will help you and your employees understand its lien rights and responsibilities.

“The lien laws are confusing, there’s no doubt about it,” says Scott Wolfe, founder of Express Lien.  “And every construction company is frustrated with with non-paying projects, the construction lien complexities, and more.  We sit down for two hours, we talk you through this process, and we help your company attack its collection black-holes.”

The 2-hour lien seminar cost $1,250.00.   The fee includes 1 free construction lien filing – a $295.00 value.   We guarantee you’ll be pleased – or we’ll refund the cost of the seminar.

Now available in:
New Orleans, LA (metro)
Baton Rouge, LA
Seattle, WA (metro)
Tacoma, WA
Other areas $1,950.00, available upon request

Express Lien Is Getting Smarter All The Time

With 2009 now underway, Express Lien is excited about the launch of new features and services that will help contractors Lien Smarter in these tough economic times.

The web and service improvements include:

The Lien Wizard: Our new lien wizard helps contractors choose which documents to file on a project, and to provide us with the information we need to prepare your instruments.  The wizard helps you Lien Smarter today…and its getting smarter everyday.

The Construction Lien Blog:   Our new blog address where we’ll blog about lien laws across the country, and any changes in the country’s lien laws.

Talk to us on Twitter:  Keep up with Express Lien’s services on Twitter, where we tweet about lien laws, construction news, Express Lien services and more.   http://www.twitter.com/expresslien

We File Notices, Lien Cancellations, Liens, Public Liens and More.  If it’s a legal document that applies to your construction project – we prepare it, file it, send it and save it.

Client Login & Lien Management:  Our clients can now login to the Express Lien website and manage all of their projects and lien documents, and since we save all of their information online:  place new orders quicker than ever.

Help! Our new “How Express Lien Works” page guides visitors through our website, our wizard, our lien management software and more with instructional manuals, videos, and other help documentation.  Don’t forget, you can always contact us via email or live chat, too.

GA Firm Recommends Using A Lien Filing Service

Penessa & Associates, LLC, a Georgia law firm that practices construction law, recommends on its website that contractors, suppliers and other construction professionals use a lien filing service to file liens.

Here’s what they say here:

The best advice that we believe that we can give a Georgia contractor on filing a lien in Georgia is to hire a professional lien filing service.

Georgia lien law is based on statute and one must follow the rules of the Georgia lien law statute to the letter for the Georgia lien to be valid.

It has been the experience of this law firm that liens can be filed most cost-effectively and correctly through the use of a lien filing service. Contractors who do not have requisite experience can miss a key requirment in Georgia lien law and the lien can be filed with mistake that goes unnoticed until after the time has passed to file a valid Georgia construction lien. A professional lien service charges much less than what a construction lawyer will charge for this very important service.

Express Lien is a professional lien filing service that files liens in Georgia, and across the country.  We’re bonded and insured, and we’re a licensed legal document preparation company in Los Angelos County.   For more information on Express Lien and why we’re best situated to help your company, click here.

Georgia Lien Law Information and Resources Online

The Express Lien Services page has now been updated to provide readers with free information about Georgia’s lien laws.   The Georgia lien law summary page provides (i) A summary of notice requirements and lien deadlines; (ii) links to free online resources; (iii) free legal forms available for download; and (iv) a listing of Georgia construction attorneys.

The Georgia resources and information is provided to the public free of chrage, and is another way Express Lien is helping construction professionals in Georgia Lien Smarter.

Furthermore, you can read blog posts here at the Construction Lien Blog related to Georgia by visiting the “Georgia Tag.”

Free Lien Laws, Resources & Forms Now Available

Over the past few weeks, Express Lien has been improving the design and function of its website. As reported through a separate release, we’ve added the new LienWizard to guide visitors through the lien process and the ordering of notices, liens and more. We’ve also added a “How Express Lien Works” page as a comprehensive support site, where users can watch videos and screencast tutorials on how Express Lien can help companies Lien Smarter.

We’re now happy to announce to our visitors that the “Our Services” section of the website has been launched.

This section of the site not only explains to visitors the services provided by Express Lien, but it also provides free state-by-state lien law resources.

The site summarizes the notice requirements and lien deadlines for each state, provides you valuable links to other other resources on the web related to that state’s lien laws, has a collection of free lien and notice forms for easy download, and even provides you with a directory of some of that state’s construction attorneys.

The new services portion of ExpressLien.com is just another way for our company to help you Lien Smarter.

Caution: Lien Laws in are Hyper-Technical

In most states, the liens laws are hyper-technical.   This means that the laws have many requirements, and that courts strictly construe the rules against the party filing construction liens.

This is true for nearly every state.

While laws across the nation provide lien rights to those in the construction industry, because of the power of these instruments most states require that the liens be filed in exact accordance with the law to be valid.

This is especially the case with regard to the required contents of a lien.

Each state has different requirements for what must be stated within a mechanic’s lien, and how that information must be stated.

Every state, for example, will require the claimant to identify the property being liened.  In Louisiana, Washington and Virginia, however, the law requires that the lien use the legal property description and not simply a municipal address.   The proper identification of property can be so important we’ve written an entire blog post about it here.

In Virginia, the laws are even stricter.   Because the Virginia lien law is land record based, the claimant is expected to perform a complete title search to acquire the exact legal owner and legal property description.   A lien that does not lien the exact owner, at the exact property for the exact amount due, can be deemed invalid by courts.

Express Lien does this leg work for your company, helping your company properly prepare these important legal forms.   Our professional legal document preparers are familiar with the lien and notice forms in your state, and can help your company Lien Smarter.