Home>Levelset Community>Legal Help>Is this an accurate statement: "Parties may not file a claim against funds when no funds are owed to the higher tier party at the time the lower tier party files the claim of lien.

Is this an accurate statement: "Parties may not file a claim against funds when no funds are owed to the higher tier party at the time the lower tier party files the claim of lien.

North CarolinaMechanics Lien

My company is in a dispute for services rendered by a temp labor agency. We have held back payment (less than 10%) of their total invoiced. We have been paid by our clients, who have recently informed us that this labor agency is threatening to file a mechanics lien on our customers property. Does the quote above apply? can the temp company file a lien in this situation?

2 replies

Aug 31, 2017

There are a lot of different parts to this question, and a lot of different rules and requirements that can come into play - including notice and timing requirements. You can read more about them here: https://www.zlien.com/mechanics-lien/north-carolina-lien-law-faqs/

Additionally, it appears that you are discussing two separate potential liens. In North Carolina, there is a claim of lien upon funds, and a claim of lien upon real property. The lien on funds would be agains the funds remaining unpaid to the party from whom the lien claimant is awaiting payment. This does not have any bearing on the property itself. Notwithstanding the fact that a lien on funds does not encumber the property, to the extent that there are no funds unpaid to the party that must pay the claimant, it would have no effect.

To the extent that the potential lien claim would be a claim of lien on real property (the type of lien claim that would encumber the property itself) a similar limitation applies in North Carolina. North Carolina is an "unpaid balance" lien state, which means that liens are limited to the amount the owner has not yet paid.

None of the above necessarily means that a claimant couldn't get a lien filed, however. While it may ultimately be invalid or unenforceable, recorders seldom act as gatekeepers policing what should or shouldn't be filed. There is still the possibility that a claimant could file an invalid/unenforceable lien that would then need to be removed.

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Aug 31, 2017

I think Nate hits the nail on the head here. There are a lot of issues. I would break it down like this:

1. Yes, labor companies and temp companies can generally file a lien
The first question is whether a labor or temp company can file a lien. The answer to that question is yes. Anyone -- anyone -- who furnishes labor to a construction project can file a mechanics lien if they are not paid directly for their labor.

2. What if the owner already paid the general? Or the general has paid a sub? Etc.
The question here is whether a lower tiered party can file a lien and collect if companies above them in the payment chain have already been paid. There are two components to this.

First, whether a lien can be filed. The answer to this is yes. A lien can be filed. BUT...

But, in some cases, the owner may have a defense against the lien. If you're in an "Unpaid Balance" state, then the owner can wiggle out of the lien claim to the extend that the owner has paid ALL OF THE MONEY he or she will ever owe to the lower tiered parties. If the owner has any money still due to anyone, for anything, he or she needs to hold onto that money as a trust fund for the lower-tiered unpaid parties...

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