Mechanic's Lien Changes on the Way in North Carolina?

A committee within the General Assembly of North Carolina has passed legislation onto the full House regarding potential changes in the state's mechanic's lien law. One attorney with clients in the state believes the change could be positive for creditors and materials suppliers overall, but it could also allow the state to undermine some lien rights.

A Judiciary subcomittee consider and “reported favorably” on a pair of two-week-old mechanic's lien-related proposals (H.B. 1101 and H.B. 1102) on May 28. They will now be heard before the full state House on June 3, with the potential for a vote that day. H.B. 1101 seeks to improve protections provided in the state on construction projects regarding performance bonds. James Hays, Esq., a partner with Gonzalez Saggio & Harlan LLP, believes the changes will be good for creditors and subcontractors.

"It requires bonds for improvements when the state or county enters a long-term lease, such as to a Development Authority," Hays said. "Some projects where the owner is still the government, and therefore no lien rights exist, are now required to be protected by bonds as if the governing body was contracting for the work." As such, Hays believes it could possibly become a more frequent tactic by state governing bodies pursuing new development to go the P3 route. Note: The June issue of Business Credit discusses an exception written into the proposal for public-private partnerships P3s.

The only substantive change made to the proposal during the hearing was the addition of the following clause: “For the purposes of this subsection, any building or other work or improvement constructed upon land owned by a contracting body shall be deemed to be a public building or other public work or public improvement.”

H.B. 1102 simply clarifies information required to be provided in a notice to a lien agent. Hays noted further that the notices should not alter anyone’s current approach to the lien law and that it "merely establishes that the preliminary notice does not serve as the required lien notice after the work has concluded."

- Brian Shappell, CBA, CICP, NACM staff writer

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