North Carolina Introduces New Lien Law

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On April 1, this year, a new law concerning liens went into effect in North Carolina. The new law attempt to balance the needs of all parties involved in the lien process and introduces a new role in the process: the lien agent, which had not previously existed in North Carolina.

At the start of this new law’s implementation, project owners must designate lien agents for all private projects where the total costs of improvements is $30,000 or more. This excludes improvements to prior existing family residences. Lien agents must be a title-insurance company or agency that has been chosen from a list of registered lien agents maintained by the Department of Insurance.

The new law will highly favor title-insurance companies, who had previously had to pay substantial amounts as a result of “hidden liens”. The new law attempts to alleviate these “hidden liens” and appease title-insurance companies’ exposure in North Carolina. In the past, title-insurance companies lobbied heavily to change the North Carolina’s relation-back doctrine, which allowed lien claimants to file a lien after the project had been completed, resulting in these title-insurance companies having to pay large amounts.

Lien agents serve to regulate potential lien claimants on a property. All potential lien claimants who wish to lien the real property that is subjugated to this North Carolina law must provide written notice of their involvement to the designated lien agent for the property. The N.C. General Assembly has provided a statutory form that should be used for this.

  Author: Sean Foley Legal Trainee Bridgehouse Law Charlotte