{"id":1110,"date":"2012-12-21T08:32:46","date_gmt":"2012-12-21T15:32:46","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=1110"},"modified":"2012-12-19T11:14:48","modified_gmt":"2012-12-19T18:14:48","slug":"mechanics-lien-law-changes-for-subcontractors","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/mechanics-lien-law-changes-for-subcontractors\/","title":{"rendered":"Mechanics&#8217; Lien Law Changes for Subcontractors"},"content":{"rendered":"<p>Parker Poe &#8211; November 29, 2012<\/p>\n<p style=\"margin: 0px 0px 12px; padding: 0px; color: #5f6062; font-family: verdana, arial, helvetica, sans-serif; font-size: 12px; line-height: 16px;\">Substantial changes to North Carolina\u2019s mechanics\u2019 lien and bond laws are slated for 2013. These changes include:<\/p>\n<ul style=\"margin: 0px 0px 0px 15px; padding: 0px; color: #5f6062; font-family: verdana, arial, helvetica, sans-serif; font-size: 12px; line-height: 16px;\">\n<li style=\"margin: 0px 0px 12px; padding: 0px;\">Curtailing a contractor\u2019s ability to waive the lien rights of its subcontractors<\/li>\n<li style=\"margin: 0px 0px 12px; padding: 0px;\">Requiring service of a \u201cContractor\u2019s Project Statement\u201d and \u201cNotice of Public Subcontract\u201d on bonded public projects<\/li>\n<li style=\"margin: 0px 0px 12px; padding: 0px;\">Establishing a new lien agent regime which places pre-lien filing notification obligations on contractors and subcontractors<\/li>\n<\/ul>\n<p style=\"margin: 0px 0px 12px; padding: 0px; color: #5f6062; font-family: verdana, arial, helvetica, sans-serif; font-size: 12px; line-height: 16px;\">The summary below highlights some of the most significant upcoming changes for subcontractors. As you review the information below, keep in mind that a \u201ccontractor\u201d for mechanics\u2019 lien purposes is not a licensed general contractor, but rather is anyone who contracts directly with the owner of real property for the improvement of that property. In the same vein, a \u201csubcontractor\u201d for mechanics\u2019 lien purposes is anyone who contracts with a contractor (or with a higher-tier subcontractor) for the improvement of real property. These definitions hold true regardless of whether the \u201ccontractor\u201d or \u201csubcontractor\u201d has provided labor, equipment, materials, or professional design services for improvement of real property.<\/p>\n<h3 style=\"margin: 0px 0px 12px; padding: 0px; font-size: 12px; font-weight: normal; color: #4d917b; font-family: verdana, arial, helvetica, sans-serif; line-height: 16px;\"><strong style=\"margin: 0px; padding: 0px;\">I. MECHANICS\u2019 LIENS<\/strong><\/h3>\n<ol style=\"margin: 0px 0px 0px 18px; padding: 0px; color: #5f6062; font-family: verdana, arial, helvetica, sans-serif; font-size: 12px; line-height: 16px;\">\n<li style=\"margin: 0px 0px 12px; padding: 0px;\"><strong style=\"margin: 0px; padding: 0px;\">Content of Subrogation Lien<\/strong>. Effective January 1, 2013, a Claim of Lien must include the name of the contractor through which the subcontractor claims its subrogation rights. Also effective January 1, 2013, a subcontractor filing a Claim of Lien will be permitted to use either (a) its own first or last dates of furnishing labor, materials, equipment, or services on the project, or (b) the first or last dates of the contractor through which subrogation rights are claimed.<\/li>\n<li style=\"margin: 0px 0px 12px; padding: 0px;\"><strong style=\"margin: 0px; padding: 0px;\">Service of Lien<\/strong>. Effective January 1, 2013, a Claim of Lien must be served on both the owner of the property and the contractor through which subrogation rights are claimed. The Claim of Lien must include a certification of service. Service can be accomplished by, and is deemed complete when, the Lien is: (a) personally delivered; (b) deposited for delivery with the United States Postal Service; or (c) deposited for delivery with a designated delivery service (i.e., DHL Express, Federal Express, or UPS).<\/li>\n<li style=\"margin: 0px 0px 12px; padding: 0px;\"><strong style=\"margin: 0px; padding: 0px;\">Increased Penalties for False Statements<\/strong>. Effective January 1, 2013, a false written statement of the sums due or claimed to be due for labor or material will be considered not only a Class 1 misdemeanor, but also \u201cshall constitute deceit and misconduct subject to disciplinary action\u201d under the General Contracting statutes, including \u201crevocation, suspension, or restriction of a license or the ability to act as a qualifying party for a license.\u201d<\/li>\n<li style=\"margin: 0px 0px 12px; padding: 0px;\"><strong style=\"margin: 0px; padding: 0px;\">Effect of Contractor\u2019s Lien Waiver on the Rights of Subcontractors<\/strong>. Currently a contractor can waive a subcontractor\u2019s subrogation lien rights if it signs a lien waiver prior to the subcontractor\u2019s filing a lawsuit to enforce its subrogation lien. Effective April 1, 2013, no action of the contractor will be effective to prejudice the rights of a subcontractor if (1) the subcontractor has given notice to the lien agent (see the lien agent discussion, below), (2) the subcontractor has served a notice of lien upon funds on the property owner, and (3) the subcontractor has delivered a copy of the notice of claim of lien upon funds the lien agent.<\/li>\n<\/ol>\n<h3 style=\"margin: 0px 0px 12px; padding: 0px; font-size: 12px; font-weight: normal; color: #4d917b; font-family: verdana, arial, helvetica, sans-serif; line-height: 16px;\"><strong style=\"margin: 0px; padding: 0px;\">II. PAYMENT BONDS ON PUBLIC PROJECTS<\/strong><\/h3>\n<ol style=\"margin: 0px 0px 0px 18px; padding: 0px; color: #5f6062; font-family: verdana, arial, helvetica, sans-serif; font-size: 12px; line-height: 16px;\">\n<li style=\"margin: 0px 0px 12px; padding: 0px;\"><strong style=\"margin: 0px; padding: 0px;\">Copy of Payment Bond<\/strong>. Effective January 1, 2013, a contractor will be required to furnish a copy of the payment bond to a subcontractor who has requested a copy in writing. The request for a copy of the payment bond may be made by certified mail or by any method authorized for the service of a summons. The payment bond must be furnished by the contractor within 7 days, and the subcontractor will be exempt from the \u201cnotice of public subcontract\u201d requirement (discussed below) if the bond is not timely provided.<\/li>\n<li style=\"margin: 0px 0px 12px; padding: 0px;\"><strong style=\"margin: 0px; padding: 0px;\">Contractor\u2019s Project Statement<\/strong>. Effective January 1, 2013, a subcontractor will be entitled to receive from the contractor (or, if contracting with a higher tier subcontractor, from that subcontractor) and will be required to provide to each of its own lower-tier subcontractors a copy of the \u201cContractor\u2019s Project Statement.\u201d The \u201cContractor\u2019s Project Statement\u201d is a document furnished by the contractor containing the following information: (a) the name of the project; (b) the physical address of the project; (c) the name of the contracting body; (d) the name of the contractor; (e) the name and contact information of an agent authorized by the contractor to accept service of the requests for payment bond, the Notice of Public Subcontract, and the Notice of Claim on Payment Bond; and (f) the name and address of the principal place of business of the surety issuing the payment bond for the project. No agreement entered into between a contractor and a subcontractor, or between a subcontractor and a lower tier subcontractor, will be enforceable against the lower-tier party until the \u201cContractor\u2019s Project Statement\u201d has been provided to that party.<\/li>\n<li style=\"margin: 0px 0px 12px; padding: 0px;\"><strong style=\"margin: 0px; padding: 0px;\">Notice of Public Subcontract<\/strong>. Effective January 1, 2013, a subcontractor will be required to serve a \u201cNotice of Public Subcontract\u201d on the contractor (or any agent identified in the \u201cContractor\u2019s Project Statement\u201d) which includes the following information: (a) the name and address of the subcontractor; (b) a general description of the property being improved; (c) a general description of the subcontractor\u2019s contract, including the names and addresses of the parties; and (d) a general description of the labor and material performed or furnished. The Notice may be served by certified mail or by any method authorized for the service of a summons. The best practice is to serve the Notice of Public Subcontract immediately, as (with one exception) a claim on the payment bond cannot include labor or materials provided more than 75 days prior to the bond claimant\u2019s service of the Notice of Public Subcontract. The one exception to the 75-day rule is a \u201c$20,000.00 carve out\u201d which provides that (1) there is no requirement to provide a Notice of Public Subcontract where the claim is $20,000.00 or less, and that (2) where the claim is more than $20,000.00, only that portion of the claim which is in excess of $20,000.00 is subject to the Notice requirement.<\/li>\n<\/ol>\n<h3 style=\"margin: 0px 0px 12px; padding: 0px; font-size: 12px; font-weight: normal; color: #4d917b; font-family: verdana, arial, helvetica, sans-serif; line-height: 16px;\"><strong style=\"margin: 0px; padding: 0px;\">III. THE NEW LIEN AGENT REGIME<\/strong><\/h3>\n<p style=\"margin: 0px 0px 12px; padding: 0px; color: #5f6062; font-family: verdana, arial, helvetica, sans-serif; font-size: 12px; line-height: 16px;\">The biggest change by far to the existing mechanics\u2019 lien laws is the adoption of a lien agent regime. The lien agent regime is designed to protect title insurance companies from liens filed after a title policy is issued by requiring that contractors and subcontractors provide notice of their involvement on a project in order to protect their full mechanics\u2019 liens rights. The lien agent provisions are set to become effective April 1, 2013. However, early indications are that a technical revision bill will be forthcoming from the Legislature which may modify certain portions of the recently-enacted lien agent legislation, and the following summary discusses the key provisions of the lien agent regime as currently enacted.<\/p>\n<ol style=\"margin: 0px 0px 0px 18px; padding: 0px; color: #5f6062; font-family: verdana, arial, helvetica, sans-serif; font-size: 12px; line-height: 16px;\">\n<li style=\"margin: 0px 0px 12px; padding: 0px;\"><strong style=\"margin: 0px; padding: 0px;\">Lien Agent Contact Information<\/strong>. The owner of any set of improvements to private property for which the cost of the undertaking at the time the original building permit is issued is $30,000 or greater must designate a lien agent no later than the time that the owner first contracts with any person to improve the property. The contact information for the designated lien agent is available to potential lien claimants in two different ways:<br style=\"margin: 0px; padding: 0px;\" \/>(i)\u00a0<strong style=\"margin: 0px; padding: 0px;\">Posting on Project Site<\/strong>. If the lien agent contact information is included in the building permit or an attachment thereto, the building permit is to be \u201cconspicuously and continually\u201d posted on the project site until completion of all construction. If the lien agent contact information is not included in the building permit or an attachment thereto, then a sign containing the information must be \u201cconspicuously and continuously\u201d posted on the property until the completion of all construction.<br style=\"margin: 0px; padding: 0px;\" \/>(ii)\u00a0<strong style=\"margin: 0px; padding: 0px;\">Individual Notice to Potential Lien Claimants<\/strong>. A potential lien claimant may make a written request to the owner for the lien agent\u2019s contact information. The request must be sent by certified mail, physical delivery, facsimile with a confirmation page, or by other designated methods. The owner has 7 days after receipt of the request to provide the information to the requesting party, and is to provide such information by the same method that was used by the potential lien claimant in making the request.<\/li>\n<li style=\"margin: 0px 0px 12px; padding: 0px;\"><strong style=\"margin: 0px; padding: 0px;\">Notice to Off-Site Subcontractors<\/strong>. A subcontractor who is not required to furnish labor at the actual site of the improvements is entitled to receive written notice of the lien agent\u2019s contact information from the contractor (or higher-tier subcontractor) with which it contracted within three (3) business days of the date the contract is entered into. Similarly, a subcontractor that contracts with a lower-tier subcontractor who is not required to furnish labor at the actual site of the improvements is required to give that lower-tier subcontractor written notice containing the lien agent\u2019s contact information within three (3) business days of the date the contract is entered into. If a contractor or subcontractor fails to provide the information, it may be liable for any actual damages incurred by the lower-tier party.<\/li>\n<li style=\"margin: 0px 0px 12px; padding: 0px;\"><strong style=\"margin: 0px; padding: 0px;\">Providing \u201cNotice to Lien Agent.&#8221;<\/strong>\u00a0If it wants to protect its full lien rights, a subcontractor must give to the lien agent a \u201cNotice to Lien Agent.\u201d The Notice must contain the following information: (1) the potential lien claimant\u2019s name, mailing address, telephone number, fax number (if available), and electronic mailing address (if available); (2) the name of the party with whom the potential lien claimant has contracted to improve the real property; (3) a description of the real property being improved; and (4) a statement that \u201cI give notice of my right subsequently to pursue a claim of lien for improvements to the real property described in this notice.\u201d The Notice must be given by certified mail with return receipt requested, physical delivery and obtaining a delivery receipt from the lien agent, facsimile with a facsimile confirmation, or by one of the other designated methods. To best protect its lien rights, a subcontractor should provide its \u201cNotice to Lien Agent\u201d within 15 days after its first furnishing of labor or materials on the project, as the failure to do so may result in the inability to later file a mechanics\u2019 lien or in having the mechanics\u2019 lien deemed subordinate to a mortgage or deed of trust.<\/li>\n<li style=\"margin: 0px 0px 12px; padding: 0px;\"><strong style=\"margin: 0px; padding: 0px;\">\u201cNotice to Lien Agent\u201d is Not a Lien on Funds or Claim of Lien<\/strong>. The \u201cNotice to Lien Agent\u201d is not a lien on funds nor is it a claim of lien on real property. A subcontractor must still serve its lien on funds and file its claim of lien in accordance with existing mechanics\u2019 lien laws (as modified by the recent legislation).<\/li>\n<\/ol>\n<p><a href=\"http:\/\/www.parkerpoe.com\/news\/mechanics-lien-law-changes-for-subcontractors\/\">Parker Poe News | Mechanics&#8217; Lien Law Changes for Subcontractors<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Parker Poe &#8211; November 29, 2012 Substantial changes to North Carolina\u2019s mechanics\u2019 lien and bond laws are slated for 2013. These changes include: Curtailing a contractor\u2019s ability to waive the lien rights of its subcontractors Requiring service of a \u201cContractor\u2019s Project Statement\u201d and \u201cNotice of Public Subcontract\u201d on bonded public projects Establishing a new lien&hellip; <a class=\"more-link\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/mechanics-lien-law-changes-for-subcontractors\/\">Continue reading <span class=\"screen-reader-text\">Mechanics&#8217; Lien Law Changes for Subcontractors<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[8],"tags":[184,121],"class_list":["post-1110","post","type-post","status-publish","format-standard","hentry","category-mechanics-lien-rights","tag-mechanics-lien-law","tag-subcontractors","entry"],"jetpack_publicize_connections":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Mechanics&#039; Lien Law Changes for Subcontractors - Advise &amp; Consult, Inc.<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/mechanics-lien-law-changes-for-subcontractors\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Mechanics&#039; Lien Law Changes for Subcontractors - Advise &amp; Consult, Inc.\" \/>\n<meta property=\"og:description\" content=\"Parker Poe &#8211; November 29, 2012 Substantial changes to North Carolina\u2019s mechanics\u2019 lien and bond laws are slated for 2013. These changes include: Curtailing a contractor\u2019s ability to waive the lien rights of its subcontractors Requiring service of a \u201cContractor\u2019s Project Statement\u201d and \u201cNotice of Public Subcontract\u201d on bonded public projects Establishing a new lien&hellip; Continue reading Mechanics&#8217; Lien Law Changes for Subcontractors\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.myconstructionexpert.com\/blog\/mechanics-lien-law-changes-for-subcontractors\/\" \/>\n<meta property=\"og:site_name\" content=\"Advise &amp; Consult, Inc.\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/Advise-Consult-Inc-126949043996790\/\" \/>\n<meta property=\"article:published_time\" content=\"2012-12-21T15:32:46+00:00\" \/>\n<meta name=\"author\" content=\"admin\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@adviseconsult\" \/>\n<meta name=\"twitter:site\" content=\"@adviseconsult\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"admin\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"9 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/mechanics-lien-law-changes-for-subcontractors\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/mechanics-lien-law-changes-for-subcontractors\/\"},\"author\":{\"name\":\"admin\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/person\/0a11abe008083d5fb19c2b0feefe7bd7\"},\"headline\":\"Mechanics&#8217; 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These changes include: Curtailing a contractor\u2019s ability to waive the lien rights of its subcontractors Requiring service of a \u201cContractor\u2019s Project Statement\u201d and \u201cNotice of Public Subcontract\u201d on bonded public projects Establishing a new lien&hellip; Continue reading Mechanics&#8217; Lien Law Changes for Subcontractors","og_url":"https:\/\/www.myconstructionexpert.com\/blog\/mechanics-lien-law-changes-for-subcontractors\/","og_site_name":"Advise &amp; Consult, Inc.","article_publisher":"https:\/\/www.facebook.com\/Advise-Consult-Inc-126949043996790\/","article_published_time":"2012-12-21T15:32:46+00:00","author":"admin","twitter_card":"summary_large_image","twitter_creator":"@adviseconsult","twitter_site":"@adviseconsult","twitter_misc":{"Written by":"admin","Est. reading time":"9 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/www.myconstructionexpert.com\/blog\/mechanics-lien-law-changes-for-subcontractors\/#article","isPartOf":{"@id":"https:\/\/www.myconstructionexpert.com\/blog\/mechanics-lien-law-changes-for-subcontractors\/"},"author":{"name":"admin","@id":"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/person\/0a11abe008083d5fb19c2b0feefe7bd7"},"headline":"Mechanics&#8217; 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