The lien blog is currently briefly examining the upcoming changes to North Carolina lien law. Previous installments can be found here, here, and here. This post notes the “new” clarification of when a lien upon funds attaches, for bankruptcy purposes.
This revision is interesting because it doesn’t actually revise anything. There has been no real substantive change. North Carolina merely codified a long-standing rule that had recently been called into question by a couple of court decisions. These recent bankruptcy decisions called into question the generally accepted rule regarding when a Notice of Claim of Lien Upon Funds (or subrogated Lien on Real Property) attaches. The “old” rule is the same as the “new” rule. According to the new section 44A-18, starting on January 1, 2013, it is clear that a Lien arises and attaches at the moment of first furnishing labor or materials at the project site. This is a generally accepted rule in many other states, as well as being the clear rule in North Carolina even before this codification.
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While this doesn’t really change anything in the law, it codifies the time of attachment of a Lien in North Carolina, and therefore, should remove any doubt. It should also remove any obstacle from the lien claimant serving his lien after another party in the chain files for bankruptcy. As someone who has previously blogged about mechanic’s liens in the face of bankruptcy, and the relatively strong protection they give, it is nice to see this rule put down in black and white.