North Carolina Legislature Uncovers "Hidden Liens"

The North Carolina General Assembly recently enacted significant changes to North Carolina's mechanics lien laws. These changes become effective on April 1, 2013. As of that date, potential lien claimants must identify themselves (by written notice to the property owner's designated "lien agent") soon after they become involved in a project in order to retain their lien priority vis a vis purchasers and lenders. Generally, a property owner must designate a lien agent in order to obtain a building permit. The designee's contact information will either be on the permit or posted conspicuously on a separate job site sign. If the owner/developer fails to conspicuously post, update and provide on request the lien agent contact information, the potential lien claimants are exempted from the statute's limitations on their lien priority.

In the course of a loan closing or a purchase, the closing parties will check with the owner/developer's lien agent (rather than relying merely on an owner's identification of parties with whom the owner has contracted). A group of North Carolina title companies have designed a website [www.liensnc.com] that will be operational on April 1. Through this site, contractors can provide notice of their involvement in a project, and lenders, owners and purchasers can monitor lien rights claimed by contractors. Closing parties will then obtain waivers, subordinations or other documentation from those who have formally identified themselves to the developer's lien agent.

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