As of April 1, 2013, North Carolina Gen. Stat. § 44A-23 – the statute that sets forth the manner in which subcontractors can exercise lien rights on lien property – has been modified. In our first blog on this amendment, we discussed the two methods for subcontractors to assert lien rights on property of the homeowner or commercial developer: 1) through a notice of claim of lien upon funds; and 2) through subrogation, where the subcontractor asserts what lien rights the general contractor may have against the property owner. Although there have been a few changes in this statute, the most important aspect of the statute has not changed: the initial procedure that a subcontractor must take to be able to utilize subrogation to directly lien the property. To discuss subcontractor liens, contact the construction law attorneys of Maginnis Howard at (919) 526-0450 or submit an inquiry here.
A notice of lien upon funds to the property owner restricts the land owner from paying its general contractor until any issues with the sub-contractor are resolved. Further payment to the general contractor after receipt of the notice of claim of lien upon funds can expose the owner to personal liability. Sub-contractors would be wise to utilize this procedure as soon as a dispute arises. Although it may create some discord with the general contractor, a subcontractor could serve the notice of claim of lien upon funds as soon as they provide materials or labor on the project. This would provide the greatest level of protection for the subcontractor.
Although it’s a valuable tool, the notice of claim of lien on funds does not place a lien on the property. To do that, the subcontractor must utilize the subrogation provision of the lien statute. Subcontractors can only lien to the extent that the general contractor has rights against the property owner (though the new amendments protect the subcontractors from the general contractor waiving those rights). Most importantly, subcontractors cannot immediately lien the residential property without first utilizing the notice of lien upon funds. Liens on the property by the subcontractor without first filing a notice of lien upon funds are improperly filed and subject to being nullified by the home owner.
Maginnis Law is a Raleigh civil litigation firm with construction lawyers handling cases in Cary, Apex, Wake Forest, the rest of Wake County, Granville County, Johnston County, Franklin County, Durham County, Chatham County, and Orange County. If you are a homeowner who has received a lien or notice of lien upon funds, or a contractor who wishes to understand and utilize the lien statutes to their benefit, contact the firm at 919.526.0450 or submit a new case inquiry here.