Author Archives: Melissa Dewey Brumback

The ABCs of Current NC Lien Law

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Since we talked last week about possible changes to the lien law, I’ve had a few folks ask me to take a step back and discuss the ABCs of current lien law in North Carolina.  Ask and ye shall receive………..

 Part 1:  Lien Law Rights for Contractors, Subcontractors, & Design Professionals

Who can file a lien?

Anyone who furnishes materials or labor to improve real property can file a lien on that property.  This includes design professionals who provide services related to improvement of real property, contractors, and subcontractors (down to the 3rd tier). 

What types of liens are there in NC?

There are three types of lien claims in North Carolina.

1.  The Claim of Lien on Real Property (NC Gen. Stat. §44A-12) is for a person who contracts directly with the owner of the property.  This can be a general contractor, a separate independent contractor, or a design professional.

2.  The Notice of Claim of Lien upon Funds (NC Gen. Stat. §44A-18 and §44A-19) is available to subcontractors (down to third-tier subcontractors), and allows them to have a lien right to any funds owed to the party that contracted with them in the chain of title.  In other words, 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 (and the lawsuit to enforce the lien is thereafter properly filed), the owner cannot pay the general contractor until the subcontractor’s lien is extinguished.

3.  The Subrogated Claim of Lien on Real Property (NC Gen. Stat. §44A-23) also provides real property lien rights to the subcontractor, to the extent the party he contracted with has lien rights.

When and Where must a lien be filed?

Lien claims in North Carolina must be filed in the clerk of court where the property is located, within 120 days of the claimant’s last date of furnishing. 

What does “perfecting a lawsuit” mean?

A lawsuit must be filed to enforce the lien.  This is called “perfecting” the lien, and it must be done within 180 days of a claimant’s last date of furnishing.  The lawsuit can be filed in any proper county so long as an appropriate Lis Pendens is also timely filed in the county where the property is located. 

What special remedies are available for a lien claim?

If a lien lawsuit is perfected and a judgment rendered, the court can direct the property to be sold to satisfy the lien.  Additionally, you can recover attorney fees for the lien lawsuit.  Pretty cool, huh?

  souffle

Crafting a proper lien is like making souffle- no room for error!

In summary:

As you can imagine, liens can be very powerful tools to help ensure recovery of money owed to contractors and subcontractors on a project.  The key to exercising your lien rights is to keep watch on the running of the claim period (use of online resources can help with this)  and to ensure that the lien is (1) properly drafted; (2) timely served; (3) appropriately filed; (4) perfected with a timely lawsuit.  This is not an area where you can make a mistake—liens are subject to strict rules that must be followed to the t.  If in doubt about a lien issue, contact a knowledgeable construction law attorney in your jurisdiction.

We’ll continue our discussion with Part 2 (next Thursday), when we discuss how to handle a lien on your property if you are the Owner

Comments about your experience using liens to maximize your chances of recovery?  Post below.  [And as always, please sign up for an email subscription to the blog  if you have not already done so].

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Photo “Soufflé” by stu_spivack via Flickr/Wikimedia/Creative Commons

Two more Construction Marketing Seminars (Tue. Tip)

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In this still weak economy, marketing is at the top of everyone’s mind.  Another web-based seminar related to Construction Marketing is coming up that aims to assist construction professionals in their marketing efforts.  Entitled “Measuring Marketing Results Best Practices for Construction,” the webinar is hosted by the Construction Marketing Association (CMA).

CMA logo

According to CMA, the webinar will address:  1) traditional methods of measuring marketing results, 2) the use of internet-based measures, and 3) new tools for social media monitoring. 

The webinar is scheduled for Monday, November 15th at 1pm Eastern Time.   Preregistration is required.

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Also next week, a second (reprisal) of Mike Jeffries’ “Profit from Your Most Important Brand- You” will be held.  The seminar is scheduled for Thursday, November 18th at 5pm Eastern.   Preregistration is also required for this seminar.

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As always, if you attend either or both seminars, please share what you learned and if the seminar(s) you attended were worthwhile to your construction practice.

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Photo:  CMA Logo

Lien Law Changes Ahead? Add your voice!

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How a Bill Becomes a LawAre you familiar with North Carolina lien law provisions?  Ever think they should be changed and updated?  You are not alone.   The NC Bar Association (through the Lien Law Revision Committee of the Construction Section) is in the process of preparing substantive changes to a proposed new Lien Law statute.  The committee is aiming to have a prepared piece of legislation drafted for consideration in the upcoming legislative session of the General Assembly.

According to the Lien Law Committee, revisions to the statute are needed for several reasons, including:

  • handling the uncertainty created by recent Bankruptcy court decisions relating to liens
  • reexaming the “relation back” and “double payment” issues in current lien law
  • reexaming the long form lien waivers and current problems with those waivers

Last week, at the Design Professionals Lliason Committee (another Construction Section committee), I was given a copy of the lien law draft proposal for a revision to the lien law.  The Lien Law Committee wants their proposals to be discussed by the construction industry, so that all sides can be fully vested in the new lien process.

Review the proposal and let me know what you think.  The proposal contains some rather large changes to the lien statute.  Are these good, bad, or irrelevant to your business?  Email me or comment below with any thoughts, questions, suggestions, or concerns.  I will pass all comments along to the Lien Law committee.

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Photo “How a Bill Becomes a Law” by Peter Merholtz via Flickr/Creative Commons license.

Common Sense Tip: Don’t lose your cool when sued

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Common Sense credit cardDespite the vast number of legal shows on television, as you might suspect:  getting sued is not cool.

Immediately, when threatened with litigation, it seems like everyone and everything is out to get you.  Allegations in complaints can cut deep.  You may want to just bury your head in the sand.  Don’t.  Problems denied can turn figurative mole hills into mountains.   Here are three common sense tips for dealing with the initial shock of being named in a lawsuit:

1.

Run, don’t walk, to your attorney.  If you have insurance coverage, talk to your agent immediately to report the loss so that a claims attorney can be assigned to your case.  Court deadlines are not something to be missed, and so you’ll want to get professional help on your team asap.

2.

Immediately begin to gather all documentation relating to the Project.  If you have regular paperwork or computer deletion/destruction policies, stop them at once.  Notify everyone in your company that litigation is pending (or threatened) and place holds from any automatic or scheduled deletion of documents. 

3.

Make lists.  Your attorney will need all sorts of information about the Project, even stuff you may not deem relevant.  Making lists can get your attorney up to speed quickly and efficiently.   Lists may include:

  • a general timeline of your involvement with the Project and any key dates (Notice to Proceed, Substantial Completion, First notice of defects, etc)
  • a list of the Project’s players; that is, all companies that you know worked on the Project, their role, and their key employees
  • a list of your employees that dealt with the Project in any capacity, their contact information, and, if they are no longer with your company, whether or not they left on good terms

Ever been in litigation?  Tips you wish you had known right away?  Comment below.

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Photo adapted from “common sense” by Benjamin Gray via Flickr/Creative Commons/Share Alike.

Active vs. Passive Negligence (Law note)

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whole hog sign“As long as I was in, and in for good, I might as well go the whole hog.”

–Huck Finn, The Adventures of Huckleberry Finn by Mark Twain

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If you work on a North Carolina construction project, you, too, are in “the whole hog” if you are negligent.  That is, if you are negligent at all, you are on the hook for the full lot.  As we’ve discussed, joint tort-feasors (that is, two negligent parties who are jointly & severally liable) are generally not entitled to indemnity from one another.

However, there are exceptions, and today we’re talking about one such exception– the passively negligent party.  

What is passive negligence?

Active negligence is an action which causes damage.  In contrast, passive negligence is negligence due to inaction, omission, or the failure to do something that you are legally obligated to do.   The actively negligent party is primary responsible for paying any damages, and the passively negligent party is only secondarily liable.

For example, if a subcontractor is actively negligent in constructing the framing for a building, and the general contractor failed to notice the defect, the subcontractor is actively negligent and the general contractor is passively negligent. 

Indemnity of the passively negligent party

Where the active negligence of one tort-feasor and the passive negligence of another combine to proximately cause injury to a third party, the passively negligent tort-feasor who is compelled to pay damages to the injured party is entitled to indemnity from the actively negligent tort-feasor.  This is called common-law indemnity, as opposed to contractual indemnity, which we discussed in an earlier blog post. 

In our example above, the subcontractor, as the actively negligent party, is the party ultimately responsible for the poor framing and the resulting damages.  If the general contractor is sued by the owner, he can in turn sue the subcontractor for the damages which were caused by the sub.

Questions about active versus passive negligence?  Drop me a line in the comments below.

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Photo “Whole Hog Heaven BBQ” by Bill.Roehl via Flickr/Creative Commons license.