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Despite, or perhaps because of, the complete revision of North Carolina lien law in 2012, that state has seen a relatively consistent flow of cases, modifications, and confusion related to the law surrounding mechanics liens and notices. Perhaps unsurprisingly, one area of concentration is the newly created Notice to Lien Agent.

Notice To Lien Agent – Current

On all private projects for which the original building permit is $30,000 or more, excluding all projects on existing owner-occupied single family residences, the owner is required to designate a lien agent to receive preliminary notice. The lien agent should be noted on the building permit, which, in turn, should be posted at the job site. If the identity of the lien agent is not posted at the job site, the 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, and does not replace either the Notice of Lien on Funds or Notice of Lien on Real Property.

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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.

Potential Revisions

The potential changes to the Notice to Lien Owner are relatively minor, but potentially important. HB 1102 is entitled, “An Act to Clarify the Information Required to be Provided in a Notice to Lien Agent,” but really, that seems to be misnamed. A review of the proposed changes does not reveal any substantial changes to the information required in the notice. In fact, the section of the statute concerning the content of the notice is unchanged. The proposed amendment provides some “clarification” by adding the following language: Instead of “The form of the notice to be given under this section shall be substantial as follows” the proposed statute would read “The form of the notice to be given under this section shall be legible, shall include the following information unless designated as “if available,” and shall be substantially as follows”. (emphasis added).

While it is helpful that the legislature has decided to explicitly state that the information designated as “if available” is not strictly required for an effective notice, the statute as it stands today already includes the language “if available”.

Rather than providing any substantial, or even needed, clarification as to what information should be included in a Notice to Lien Agent, the potential revisions to the statute place certain restrictions on the notice, and the lien agent. These restrictions are as follows:

1. Designation as a lien agent for the purposes of receiving a Notice to Lien Agent “does not make the lien agent an agent of the owner for purposes of receiving a Claim of Lien on Real Property, a Notice of Claim of Lien upon Funds Funds, [or] a Notice of Subcontract”. Currently, Notice of Subcontract is not specifically identified in this clause.

2. Service of a “Notice to Lien Agent does not satisfy the service or filing requirements applicable to a Notice of Subcontract under Part 2 of Article 2 of this Chapter, a Notice of Claim of Lien upon Funds under Part 2 of Article 2 of this Chapter, or a Claim of Lien on Real Property under Part 1 or Part 2 of Article 2 of this Chapter.” Similar to point 1, above, the current statute does not specifically mention Notice of Subcontract in this clause.

3. “A Notice to Lien Agent shall not be combined with or make reference to a Notice of Subcontract or Notice of Claim of Lien upon Funds as described in this subsection.”

This is interesting. What appears to have happened, is that lien agents (remember these are Title Insurance Companies) were getting notices they didn’t want to get rather than just those they did. Remember, the lien agent designation is new to NC law, and was pushed through after lobbying by the title insurance companies because they were worried about a “hidden lien” problem. By legislating that the title insurance companies had to receive notice of any potential lien, that problem was taken care of. Apparently, though, that is all they want. The fact that a Notice to Lien Agent may not be combined with or reference a Notice of Subcontract, or Notice of Claim of Lien Upon Funds smacks of the lien agent being overwhelmed, and getting more than they bargained for.

The Construction Payment Blog will be tracking this Bill’s journey to see if there are more changes made to North Carolina lien law.