I have previously discussed the ABCs of Lien Laws for those making claims on a project (that is, architects, engineers, contractors, subcontractors, and suppliers) and the 123s of Lien Laws for project owners. Now, time to learn some new tricks: enter, the Lien Agent.
In case you’ve been hiding in your man-cave waiting for warmer weather to arrive and missed all the hoopla, as of April 1, 2013, North Carolina has a new lien law act. Essentially, for *most* construction projects [there are a few limited exceptions for low dollar work or single family, owner occupied residences], owners will need to file a notice of an entity to be their “Lien Agent”, and contractors will file notices within a short window of starting work. If done correctly, it should keep everyone aware of who is on the project, who is doing what work, and who may have a lien.
The most pertinent part that affects architects and engineers? This:
N.C. Gen. Stat. § 44A‑11.2
(h) When a lien agent is not identified in a contract for improvements to real property subject to G.S. 44A‑11.1 entered into between an owner and a design professional, the design professional will be deemed to have met the requirement of notice under subsections (l) and (m) of this section on the date of the lien agent’s receipt of the owner’s designation of the lien agent. The owner shall provide written notice to the lien agent containing the information pertaining to the design professional required in a notice to lien agent pursuant to subdivisions (1) through (3) of subsection (i) of this section, by any method of delivery authorized in subsection (f) of this section. The lien agent shall include the design professional in its response to any persons requesting information relating to persons who have given notice to the lien agent pursuant to this section. For purposes of this subsection, the term “design professional” shall mean any architects, engineers, land surveyors, and landscape architects registered under Chapter 83A, 89A, or 89C of the General Statutes.
In other words, if the owner designates a lien agent up front, you follow the process and note your involvement for the record.
What if the owner does NOT designate a lien agent up front? You are covered by default, once he does so. And he will do so, as before the owner can get a building permit, he will be forced to designate a lien agent. Nice, right? You have built in protections, and you don’t need to worry about filing a lien and damaging a relationship with an owner if they are slow to pay.
The on-line system for selecting Lien Agents (for owners) and notifying Agents of your work (for everyone else) on a project is LiensNC. A helpful tip sheet produced by the Title Insurance industry walks you through the process.
Many other fine folks have weighed in on the nuts & bolts of how the new system works, so I will not repeat it all here. Instead, let me direct you to a few of these resources (apologies in advance for anyone I may have slighted):
Bryan Scott: A good place to start for a broad overview of what you need to know
For the designer’s perspective, from Matthew Bouchard:
I’m a design professional providing services prior to the execution of a contract for construction. What if there’s no lien agent in placing during my pre-construction performance?
That depends on whether your contract is with the owner or with another design professional. If you are in direct contractual privity with the owner and your contract does not include the lien agent information, the owner is responsible for providing your contact information to its lien agent upon the owner’s appointment of same. If you are a design subcontractor, you should make a written request to the owner for the lien agent’s contact information. By statute, you will have no obligation to comply with the preliminary notice requirements until you receive the contact information you have requested.
I believe that the new lien law will help design professionals, as you no longer have to worry about alienating the owner by filing a lien or risk losing your lien priority. Instead, the lien agent will be as common as a building permit. You will be protected from the beginning with little effort, and without even having to depend on the owner. What do you think?
Comments? Questions? Share you thoughts in the comments box, below.
Photo (c) Seattle Municipal Archives.
This new lien law will definitely bring a lot of relief to the subcontractors, as they can opt for the lien option with out actually damaging relations with their clients and get the payment released.
Liens are tricky. I’m assuming you are in NC. There is a Notice of Lien of Claim on Funds, and a Claim of Lien on Funds. Both of these can go regular mail, although I also recommend trying to do it certified. The perfection of the Lien is an actual lawsuit, and needs to be served in accordance with the Rules of Civil Procedure (certified carrier such as Fed Ex; certified mail; Sheriff; acceptance of service; publication).
Wow, NC has enacted some substantial changes. Although it sounds complex, it also sounds as though those lien claimants who meet all the requirements will be protected. Good luck to you and your clients!
Yes, indeed Mark. The construction bar, home builders association, title insurance companies, etc have been working on this overhaul for quite some time. Thanks for stopping by!
Melissa – this is good article. There’s an avalanche of articles out there about the new North Carolina mechanics lien law amendments, but very few of them (if any) focus specifically on the design professional’s obligations. This, therefore, will be quite useful to them.
Unfortunately, I personally think that the legislatures and lobbyists got a bit too in the weeds with this legislation. They caught the “curse of knowledge” and couldn’t see the underlying protections they sought to promote. The result is a very complicated law that I bet gets botched by lawyers, judges and, most particularly, the industry itself.
Lots of controversy here, so we’ll see in time :). Keep up the good work.
Thanks Scott for your comments!