About North Carolina Preliminary Notices
North Carolina has an interesting preliminary notice scheme, but it can be confusing. North Carolina amended it’s notice and lien laws in 2013, so those changes shouldn’t be a surprise to anybody by now – but there are still nuances to consider that can make compliance with the rules and requirements related to preliminary notice in North Carolina tricky. There are different notices that may be required in different situations, but the overarching notice requirement is the “Notice to Lien Agent.”
North Carolina created the lien agent concept in their notice requirements pursuant to legislation in 2013. The lien agent in North Carolina, and the required notice to that lien agent, was designed to confront the problem of “hidden liens.” In order for project participants in North Carolina to retain the right to file a valid and enforceable mechanics lien on most projects, they must first give preliminary notice to a designated lien agent. In North Carolina, the lien agent is required to be, “a title insurance company or title insurance agency designated by an owner pursuant to G.S. 44A-11.1.”
For any private project in North Carolina in which the original building permit is $30,000 or more, the owner is required to designate a lien agent (“title insurance company”) — and the potential lien claimant must serve this lien agent with a preliminary notice in order to protect his rights. The lien agent must be noted on the building permit for projects for which a building permit is required, which should be posted at the job site. If it is not, a 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. Further, a contractor or subcontractor must provide a material supplier with a notice identifying the Lien Agent within 3 days of contracting with that supplier.
Generally, these preliminary notices to lien agent are provided through the North Carolina online lien agent system liensnc. However, despite the official sounding name, and the general ease of electronic noticing (when everything is listed correctly) it’s not strictly necessary to provide the notice through that portal.
North Carolina law provides several methods of delivery of the notice to lien agent authorized by statute, including:
(1) Certified mail, return receipt requested.
(2) Signature confirmation as provided by the United States Postal Service.
(3) Physical delivery and obtaining a delivery receipt from the lien agent.
(4) Facsimile with a facsimile confirmation.
(5) Depositing with a designated delivery service authorized pursuant to 26 U.S.C. § 7502(f)(2).
(6) Electronic mail, with delivery receipt.
Number 6 on the list is especially intriguing. While there has not yet been litigation surrounding the sufficiency of a notice delivered via e-mail, it will be interesting to see how that plays out. Additionally, while supposedly required, the notice to lien agent (and its deadline) appears to not technically matter related to the ability to file a lien, provided the notice is given or the lien filed prior to the conveyance of the underlying property to a bona fide purchaser for value.
North Carolina also provides a mechanism for a general contractor to protect himself from double payment liability through subrogation liens filed by second or third tier subcontractors, if subcontractors don’t provide an additional notice timely. If the notice of contract is filed by the general contractor, the subcontractors and suppliers must file a notice of subcontract.