Lien Law Online eLert for 6/21/2011 - North Carolina

June 21, 2011

The North Carolina Bar Association submitted a proposed bill for introduction in the 2011 General Assembly session, developed by the NCBA’s Construction Section, and providing by revision and amendment of the statutory mechanics lien and bond laws for changes including the following:

• A notice of commencement, as currently used in several other states, to be filed by the project owner and serving to eliminate priority claims (so-called “hidden liens”) predating project commencement

• A notice to owner, to be served by subcontractors within 30 days of first furnishing as a prerequisite to perfecting a claim of lien and to avoid the effect of recent bankruptcy court decisions in NC disallowing post-petition perfection of liens

• Statutory and legally sufficient forms for partial and final lien waivers, avoiding the effect of a recent NC trial division decision construing a partial lien waiver to be a final lien waiver

• Retention of subrogated and direct-liability claims of lien against owners and retaining the claim of lien on funds

• A requirement that second and lower tiered bond claimants on public jobs provide the general contractor with a notice of subcontract as a prerequisite to a bond claim and to protect the GC against double payment liability

The bill was introduced as House Bill 489. After initial amendment, HB 489 was converted in its third version from the set of amendments and new provisions submitted by the NCBA into an act styled “An Act Authorizing The Legislative Research Commission To Study North Carolina's Mechanics' Lien And Bond Laws.” This study commission version was passed by the House and passed a first reading by the Senate. This is the current status of the proposed legislation. With the close of the current legislative session, further action on this bill is not anticipated this year.

Steven D. Hedges, Esquire (Contributing Author)

Sparrow Wolf & Dennis, P.A.