Tag Archives: construction

The ABCs of Current NC Lien Law

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[note: this article originally published Nov 11, 2010]

What are 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

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.

Contributory Negligence on the construction project (law note)

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scale of justiceI’m sometimes asked if the percentage of “fault” is something that a client can rely on to reduce the amount of money they may owe on construction project gone bad.  The short answer:  no.   As I mentioned in my post on joint & several liability, if you are even 1% liable for the damages on a project, you can be hit with 100% of the damages. 

 This is not true in many other jurisdictions, where proportional fault (called comparative negligence) is often allowed.  In those states, if you are found 20% liable, you only have to pay 20% of the damages. Not so in North Carolina.  Here, unless you are entirely passively negligent (a concept we’ll discuss next week), you may be on the hook for the full amount.

That’s not fair!

Perhaps.  But, that’s life on a North Carolina construction project.  One concept that helps to reduce the unfairness factor is the concept of contributory negligence.  In North Carolina (but few other states), if a party is negligent at all (even 1%), they cannot recover from another negligent party.  

For example:  the owner of a project sues its general contractor on a project for a late project delivery which costs the owner money.  While almost all of the delay was the contractor’s fault, the owner also caused delay by failing to deliver owner-furnished equipment in time to meet the critical path of the project.  The owner’s own failure means that the owner itself is contributorily negligent and, under North Carolina law, the owner cannot recover the rest of its damages from the contractor.

But wait! There’s more.

Before you get too excited about contributory negligence, you need to understand the concept of  jury nullification.  When contributory negligence is explained to a jury, the jury may sometimes decide not to find fault where they might otherwise apportion fault, to avoid what they perceive as an unjust result. 

In the above example, the jury might decide the owner’s failure was not really contributing to the delay after all, and therefore award the owner damages.  This is called jury nullification, and it can take the sting out of contributory negligence.

Change to NC’s Contributory Negligence law?

The concept of contributory negligence (and its complete bar to any recovery) is one which many would like to change.  There has been legislation in the NC General Assembly in recent years to abolish contributory negligence in favor of a comparative-fault  negligence, as is common in most states.  So far, this has not happened.  As they say, however, the jury is still out on whether such a change will occur.  

Do you have an opinion on contributory negligence vs. comparative negligence? Think NC’s law should change to one based on percentage of fault?  Share in the comments below.

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Photo “Scale—Image”  by Matthias Kulka/Corbis via Picasa/Creative Commons License. 



The Attorney on your Shoulder (Tues Tip)

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cat on shoulderI once had a rather abrasive (okay, mean) driver’s education teacher.  He had to drive around all day, risking life and limb, with student drivers who had no clue what they were doing.  I think that would make anyone a little abrasive, so really, I don’t find fault.  However, one tip that he taught me was truly one of those “tips you remember”.  He told all his students that, no matter what else they took away from his class, they should imagine that he was always hovering at their shoulder, and they should drive accordingly. 

How does my drivers’ education teacher relate to construction law issues?

Just like my driver’s ed teacher’s tip for safe driving, today’s Tip is a simple one.  Indeed, perhaps you might even find it a bit silly.  But picture your attorney (and you do have one, right?) hovering over your shoulder when you go about the business of your work. 

Should I really write that offensive reply email while I’m so hot I could scream? Will this one day be used against me in a court of law?  Did I make sure to have a written contract before we started this project?  What should I do to avoid that costly mistake, and get that attorney off my shoulder?  If I set up documentation systems now, at the start of the project, and follow them consistently, will the attorney knock off the nagging?  You get the picture.  Plan for the worst and hope for the best, as they say. 

No one plans to be in a lawsuit.  But it happens.  Make sure that if it happens to you, you have the best chance of a favorable outcome.

If you would like to continue receiving these tips, please sign up for email delivery direct to your inbox.

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Photo “Shoulder cat sitting” by Oceanic (Drew Robinson) via Flickr/Creative Commons License.