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Can a bank/finance institution hold a contractors/mechanics lien in NC

I have a solar loan with a finance institution that is secured in contract only by the rooftop equipment. After looking to refinance my home, the title is showing a contractor's lien on the home for the amount of the loan with the claimant being the finance institution. Is this fishy? The finance company is separate from anyone who performed work or services. To my knowledge the company who did the actual install is fully payed out by the loan disbursement.

1 reply

Jul 22, 2019

The parties to whom mechanics lien rights extend can change from state to state, but as a general rule only parties who actually furnish labor or material (or design services) to a work of improvement.

In North Carolina, specifically, “any person who performs or furnishes labor or professional design or surveying services or furnishes materials or furnishes rental equipment pursuant to a contract . . . with the owner of real property for the making of an improvement thereon” has a right to file a claim of lien on real property.

Generally, parties who solely lend money to a construction project are not granted mechanics lien rights to secure amounts due to them. These parties have other protections, such as a "construction deed of trust" or "construction mortgage." These are also recorded documents that provide security for the lender by providing an interest in the property and/or the property's fixtures. These security interests, and their priority, are set forth by N.C.G.S. § 25-9-334(h).

Accordingly, while it would be odd (and potentially not appropriate) if the lender filed a mechanics/contractor's lien if that party did not also provide labor or material, it is not odd at all that the lender would have filed a security interest in the property or fixtures. This security interest would be recorded, and would be found in a title search during a refinance. It's likely the recorded security interest would be a construction mortgage or construction deed of trust.

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