So far in the exploration of North Carolina’s changing mechanic’s lien laws we have looked at the relatively uncontroversial HB 1052, and its ramifications.  This post will take a look at the much bigger changes outlined by SB 42 – pushed through on the backs of the title insurance industry.

SB 42 was designed to confront the problem of “hidden liens”, and now requires lien claimants to give a preliminary notice to a designated lien agent in order to preserve their lien rights on certain projects.  The “lien agent” is a concept entirely new to North Carolina lien law and, interestingly enough, is defined by new section 44A-7 as, wait for it, “a title insurance company or title insurance agency designated by an owner pursuant to G.S. 44A-11.1.

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So, what does this new requirement mean for potential lien claimants in North Carolina?

For any private project in North Carolina in which the original building permit is $30,000 or more, the owner is required to designate a lien agent – and the potential lien claimant must serve this lien agent with a preliminary notice in order to protect his rights.  Projects involving improvements to an existing owner-occupied single family residence even if the $30,000 threshold is met.  The lien agent should be noted on the building permit, which should be posted at the job site.  If it is not, a potential lien claimant may request the identity of the lien agent by sending a written request to the property owner, who has 7 days in which to respond.

In order to fully protect lien rights, the potential lien claimant must serve the new Notice to Lien Agent to the lien agent within 15 days after first furnishing labor and/or materials to the project.  This is not the same as the Notice of Lien, either on Funds or on Real Property.  Those forms must also be completed, filed, and/or served subsequently in order to fully perfect the lien.

 

The Notice to Lien Agent must include: 1) the potential lien claimant’s name, address, telephone number, fax number (if available), and email address (if available), 2) the name of the party with whom the potential lien claimant contracted, 3) a description of the real property sufficient to identify it, 4) a statement giving notice of the potential lien claimant’s right to subsequently pursue a claim of lien for the improvements to the property.  The service of the Notice to Lien Agent on the identified lien agent may be accomplished by numerous means including certified mail return receipt requested, and other means with receipt confirmation.

The Notice to Lien Agent is new to North Carolina, but lien claimants in many other states have dealt with the requirements of a mandatory preliminary notice.  The takeaway is this – potential lien claimants in North Carolina must get used to the Notice to Lien Agent requirement if they want to fully protect their rights.