Whether you are a home owner in the midst of a kitchen renovation, a business owner considering an office expansion, or otherwise involved in a construction project, it is important to understand who gets paid and when. By doing so, you may avoid a construction lien being placed on your property or, conversely, successfully use the lien statutes to ensure that you get paid for you work.
What is a construction lien?
Construction liens, also known as mechanic’s liens, are legal claims on real property, often used by builders, contractors, suppliers, or subcontractors who have not been paid for their work. These liens ensure that a party who has provided labor and/or materials to a construction project recovers the value of their services. Construction liens make it extremely difficult for the owner to sell the property until the liens are satisfied or canceled. Although construction liens are important tools for builders and suppliers to ensure adequate compensation, they can also create huge problems for home or business owners whose contractors refuse to pay their subcontractors or suppliers.
How can one avoid or prevent a construction lien?
There are a few steps one can take to prevent a construction lien:
- Choose your contractor carefully. Only hire licensed contractors and make sure he or she only hires licensed subcontractors. Research the contractor’s reputation with friends, neighbors, or websites with trustworthy reviews. It may also be wise to utilize your local courthouse’s computers to see if there are any past or pending lawsuits against the contractor.
- Include specific details in your written contract. Indicate in the contract when phases of work will begin and end, and how much each phase will cost. Make sure subcontractors and material suppliers are identified with specificity.
- Pay for the construction using joint checks to the contractor and the supplier or subcontractor. These checks require endorsement by both parties and can help ensure your money makes it to the supplier or subcontractor.
How does one file a claim of lien?
A claim of lien must be filed within 120 days of the date labor or materials were last furnished to the construction project. There is a North Carolina statute that lists all of the required fields, but in short, one must provide:
- the lien claimant’s name and address;
- name and address of the record owner of the property that will be the subject of the lien;
- a description of the property on which the lien is claimed;
- name and address of the person with whom the contract for labor or materials was made;
- the date the labor/materials were first furnished;
- the date the labor/materials were last furnished; and
- a general description of the labor performed or materials furnished.
Once this form is complete, the claim of lien should be filed with the clerk of court in the county in which the real property is located. In order to recover against the lien, the lienholder must thereafter file a lawsuit against the property owner within 180 days of the last furnishing of the labors or materials. This is called “perfecting a lien” and it must be done to enforce the lien.
What is the lien agent requirement?
A new law took effect in 2013 that applies to all projects over $30,000. This law affects contractors and property owners in the following ways:
- Property owners must hire a lien agent before signing any contract to improve their property. One can visit liensnc.com to find a lien agent.
- The contractor must notify the lien agent within 15 days of first furnishing labor or materials.
- Subsequently, contractors must notify their subcontractors of their lien agent’s contact information within three days.
- If the project requires a building permit, then the contact information of the lien agent must be supplied to the permitting authority.
What are the available remedies?
If a lien on real property is filed within the time limit, in the right jurisdiction, with the correct information, and the lien is perfected, then the court may enter a judgment in favor of the claimant and order the property sold to satisfy the lien. It is also possible for the claimant to recover attorneys’ fees for the cost of filing the lawsuit.
Alternatively, the property owner can pay the amount of the lien to have the lien removed. However, if the property owner wishes to challenge the lien and have it declared invalid, it is wise to consult an experienced attorney to determine the best strategy to do so.
If a sub-contractor places a lien on your home or business, it is a good idea to consult an experienced construction attorney to discuss your rights and options, especially if you plan to challenge the validity of the lien. Alternatively, if you are a builder or supplier and have not been paid for work that you have done, a construction lien may be a good option in order to ensure payment. For more information, please visit us at www.lindleylawoffice.com.