CONSTRUCTION, MECHANIC’S LIENS
North Carolina Lien Rights for Contractors, Subcontractors and Design Professionals
What is a lien and who can file a lien?
What are the advantages of filing a lien?
- A lien can attach to the real property where materials were delivered or where construction took place. This is powerful because it can cause a court to direct that the property be sold to satisfy the lien. Importantly, filing a lien can mean that your claim is paid before a mortgage (or judgment) that is later attached to the property because a lien can relate back to when work started on the project. Who gets paid when a property is sold may come down to who properly filed a lien and who did not.
- A lien claimant can recover their attorneys’ fees spent in a lawsuit filed to recover payment on the lien.
- Where a subcontractor gives notice of a claim of lien, the owner must retain sufficient funds to cover the lien. If the owner fails to do so, then they will become personally liable to the subcontractor.
What types of liens are there in North Carolina?
- Claim of Lien on Real Property: This lien can be filed by persons who contract directly with the owner of the property, such as a general contractor, a separate independent contractor, or a design professional.
- Notice of Claim of Lien upon Funds: This lien can be filed by subcontractors. This lien provides subcontractors with a right to any funds owed to the party that contracted with them in the chain of title. For example, if the owner still owes money to the general contractor and the owner receives a Notice of Claim of Lien upon Funds by a subcontractor, the owner cannot pay the general contractor until the subcontractor’s lien is satisfied. If the owner fails to do so, then they will become personally liable to the subcontractor.
- Subrogated Claim of Lien on Real Property: This lien provides lien rights to the subcontractor to the extent the party he contracted with has lien rights. For example, a first tier subcontractor can step into the shoes of the general contractor and assert the general contractor’s lien rights if the general contractor has lien rights against the real property underlying the construction project.