North Carolina mechanics lien law has undergone some drastic changes in the past few years. In 2013, the legislature introduced the concept of a “Lien Agent“. Basically, lien agents (title companies) are required to be appointed on construction projects estimated at over $30,000 at the time the building permit is issued to prevent “hidden liens”. The statute requires all potential lien claimants to notify an owner-designated Lien Agent prior to filing a lien.
On October 1, 2018, changes are coming to North Carolina’s Notice to Lien Agent rules aimed at making the “Lien Agent system” more efficient.
Notice to Lien Agent: Cancellations and Renewals
These new rules provide for the expiration and cancellation of a Notice to Lien Agent. Now, a Notice to Lien Agent will expire after five years. The amendments further state that parties who send Notice to Lien Agent on residential jobs must cancel their notice after receiving final payment. There is no strict deadline per se, but the statute states that is must be within a “reasonable time after confirmation of receipt of final payment.” If the notice is neither cancelled nor renewed before the expiration date, they are discharged.
There is also a mechanism for renewal of a Notice to Lien Agent. A renewal will extend the expiration date another 5 years, and the notice “relates-back” to the initial date of delivery of the notice as to not affect your priority rights.
Renewals and cancellations of a Notice to Lien Agent will both take place on North Carolina’s online hub LiensNC.
Why the Changes?
These new additions are an attempt to further the goal of increased visibility on construction sites. …but why? Who does it really help?
The benefit to property owners is clear. Providing for expiration and cancellation of Notices to Lien Agent increases predictability. Without these procedures in place, a Notice to Lien Agent could lay dormant and go unnoticed for long periods of time. These changes ease the stress on the property owners by removing the dark cloud of a potential lien claims.
Unfortunately for subcontractors and other lower-tiered parties, this is yet another requirement that must be fulfilled. A Notice to Lien Agent does automatically discharge after 5 years. However, we assume it will become a business “best practice” to cancel within the stated “reasonable time” after final payment. This is also another important deadline to keep in mind. Lien laws are all about timing, missing any deadlines can seriously affect your rights and/or create liability. We’ll have to wait and see if is an important one.
If you’d like to read the changes for yourself, here’s the full text.