We are currently taking a brief look at the upcoming changes to North Carolina lien law. Previous installments can be found here, here, and here. This edition relates to 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, but rather, a clarification. There have been recent bankruptcy decisions in North Carolina that 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.
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While this doesn’t necessarily 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 protection they give, it is nice to see this rule put in black and white.