GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1993

S	1 

SENATE BILL 1411*

Short Title:  Amend N.C. Lien Law.	(Public)
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Sponsors: Senators Hartsell; and Blackmon.
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Referred to:  Judiciary II.
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May 25, 1994

A BILL TO BE ENTITLED
AN ACT TO AMEND THE GENERAL STATUTES REGARDING LIENS ON REAL PROPERTY AND TO AMEND AND MAKE PERMANENT THE LAW REGARDING ATTORNEYS' FEES IN ACTIONS RELATING TO LIENS ON REAL PROPERTY AND PAYMENT AND PERFORMANCE BONDS, AS RECOMMENDED BY THE GENERAL STATUTES COMMISSION.
The General Assembly of North Carolina enacts:
Section 1.  Article 2 of Chapter 44A of the General Statutes reads as rewritten:
"ARTICLE 2. 
" Liens on Real Property and on Funds.
"Part 1. General Provisions: Liens of 
Persons
Furnishing Labor, Services, or Materials.
"§ 44A-7.  Definitions.
			" 	In this Article:
(1)	'Contractor' means a person who contracts with an owner to improve real property.
(2)	'First tier subcontractor' means a person who contracts with a contractor to improve real property.
(3) 	'Improve' means to build, effect, alter, repair, or demolish any improvement upon, connected with, or on or beneath the surface of any real property, or to excavate, clear, grade, fill or landscape any real property, or to construct driveways and private roadways, or to furnish materials, including trees and shrubbery, for any of such purposes, or to perform any labor upon such improvements, and shall also mean and include any design or other professional or skilled services furnished by architects, engineers, land surveyors, and landscape architects registered under Chapter 83A, 89A or 89C of the General Statutes, and rental of equipment directly utilized on the real property in making the improvement.
(4)	'Improvement' means all or any part of any building, structure, erection, alteration, demolition, excavation, clearing, grading, filling, or landscaping, including trees and shrubbery, driveways, and private roadways, on real property.
(5)	'Lien' means any lien on funds or on real property or claim of a lien on funds or on real property under this Article and includes any document filed under G.S. 44A-12 or served under G.S. 44A-19.
(6)	'Lien on funds' means any lien or claim of a lien with respect to funds under this Article and includes any document served under G.S. 44A-19.
(7)	'Lien on real property' means any lien or claim of a lien with respect to real property under this Article and includes any document filed under G.S. 44A-12.
(8)	'Lienor' means a person who has either a lien on real property or a lien on funds or both under this Article.
(9)	'Obligor' means an owner, contractor, or subcontractor in any tier who owes money to another as a result of the other's partial or total performance of a contract to improve real property.
(10)	'Owner' means a person who has an interest in the real property and for whom an improvement is made and who ordered the improvement to be made. 'Owner' includes successors in interest of the owner and agents of the owner acting within their authority.
(11)	'Protected party' means an individual who purchases and takes record title to a single family dwelling unit, all or a part of which the individual or an individual to whom the individual is related occupies or intends to occupy as a residence.  An individual is 'related' to an individual if that individual is (i) the spouse of the individual; (ii) a brother, brother-in-law, sister, or sister-in-law of the individual; (iii) an ancestor or descendant of the individual or of the individual's spouse; or (iv) any other relative by blood, marriage, or adoption of the individual or the individual's spouse if the relative shares the same residence with the individual.
(12)	'Real property' means the real estate that is improved, including lands, leaseholds, tenements and hereditaments, and improvements placed thereon.
(13)	'Second tier subcontractor' means a person who contracts with a first tier subcontractor to improve real property.
(14)	'Third tier subcontractor' means a person who contracts with a second tier subcontractor to improve real property.
"§ 44A-7.1.  Waiver, release, or subordination of any lien on real property.
(a)	This section applies to any waiver, release, or subordination of any lien on real property.
(b)	A waiver of a lien on real property in consideration for the awarding of any contract for the making of an improvement on real property under this Article is against public policy and is unenforceable.  This section does not prohibit any waiver or release at any time after the contract by the lienor is made.  This section does not prohibit any subordination at any time.
(c)	A waiver, release, or subordination of a lien on real property requires no consideration.
(d)	Subject to G.S. 44A-18(8), a waiver, release, or subordination of a lien on real property serves to waive, release, or subordinate the rights of all parties claiming through the waiving, releasing, or subordinating party.
"§ 44A-7.2.  Waiver, release, or subordination of any lien on funds ineffective; compromise or settlement.  
A waiver, release, or subordination of a lien on funds prior to receipt of full payment by the waiving, releasing, or subordinating party is against public policy and is unenforceable.  This section shall not prevent parties from resolving by compromise or settlement the amount of the claim giving rise to a lien on funds.
"§ 44A-7.3.  No liens on governmental real property.
Nothing in this Article shall extend a lien on real property to the real property of the State of North Carolina or of any agencies, municipalities, counties, or other political subdivisions of the State of North Carolina.
"§ 44A-7.4.  Applicability of lien on funds to public contracts.
A lien on funds shall apply to public contracts for the improvement of real property only as to funds received by a contractor from the public owner.  No lien on funds or liability with respect to a lien on funds may be enforced against the State of North Carolina or any agencies, municipalities, counties, or other political subdivisions of the State of North Carolina.
"§ 44A-7.5.  Agency.
Any lien or notice that may be filed, recorded, or given pursuant to this Article may be executed, filed, recorded, or given by the lienor's agent or attorney.
"§ 44A-7.6.  Acknowledgment not required.
Any document that may be served, recorded, or filed under this Article need not be acknowledged.
"Part 1A.  Liens of Persons Furnishing Labor, Services, or
Materials Dealing with an Owner.
"§ 44A-8.  Persons entitled to lien on real property.
Any person who improves real property pursuant to a contract, either express or implied, with an owner for the making of an improvement to real property shall, upon complying with the provisions of this Part, have a lien on the real property to secure payment of all debts owing pursuant to the contract.
"§ 44A-9.  Extent of lien on real property.
A lien on real property shall extend to the improvement and to the lot or tract on which the improvement is situated, to the extent of the interest of the owner. When the lot or tract on which an improvement is made is not surrounded at the time of making the contract with the owner by an enclosure separating it from adjoining land of the same owner, the lot or tract to which any lien on real property extends shall be such area as is reasonably necessary for the convenient use and occupation of such improvement, but in no case shall the area include a building, structure, or improvement not normally used or occupied or intended to be used or occupied with the improvement with respect to which the lien on real property is claimed.
"§ 44Ai 
"§ 44A-10.1.  Priority of contractor's lien on real property.
(a)	General Priority. – Except as provided in subsection (b) of this section, the following rules apply to determining the priority of a contractor's lien on real property:
(1)	If a contractor's lien on real property is filed while a notice of commencement is effective as to the improvement in connection with which the contractor's lien on real property arises, the priority of the contractor's lien on real property is determined as of the time the notice of commencement is recorded.
(2)	If a contractor's lien on real property is filed while there is no effective notice of commencement as to the improvement in connection with which the contractor's lien on real property arises, the priority of the contractor's lien on real property is determined as of the time the contractor's lien on real property is filed.
(b)	Priority Against a Subsequent Purchaser That Is a Protected Party. – Whether or not a notice of commencement has been recorded, in order for a contractor's lien on real property to have priority over the interest of a subsequent purchaser that is a protected party or a successor in interest to the subsequent purchaser, the contractor's lien on real property shall be filed before the document conveying an interest in the real property to the protected party is recorded.
"§ 44A-10.2.  Notice of commencement; recording.
(a)	Except as provided in subsection (b) of this section, a notice of commencement shall be signed by the owner, shall be denominated 'notice of commencement', and shall state:
(1)	A description sufficient to identify the real property being or intended to be improved;
(2)	The name, address, and interest in the real property of the owner;
(3)	The name and address of the record owner (if different from the owner named pursuant to subdivision (2) of this subsection);
(4)	The name and address of the contractor or contractors; and
(5)	The duration of the notice of commencement.
The following form shall be sufficient:

'NOTICE OF COMMENCEMENT, OWNER RECORDING
'PLEASE TAKE NOTICE that this notice of commencement is recorded pursuant to G.S. 44A-10.2(a)	and (g).
1.	Description of the real property upon which the improvements are being or intended to be made (Street address, tax lot and block number, reference to recorded instrument, or any other description of the real property is sufficient, whether or not it is specific, if it reasonably identifies what is described.):
	..........................................................................................................................................................................................................................................
2.	The name, address, and interest in the real property of the owner:
	..........................................................................................................................................................................................................................................
3.	The name and address of the record owner (if different from the owner named above):
	..........................................................................................................................................................................................................................................
4.	The name and address of the contractor or contractors:
	..........................................................................................................................................................................................................................................
5.	Duration of this notice of commencement (not less than six months or more than three years; if none stated, duration is one year):
	..........................................................................................................................................................................................................................................

...........(Insert name of owner)...........
             Owner

By:.............(signature).......................'

(b)	If there is no effective notice of commencement applicable to an improvement, a lienor who is entitled to file a lien on real property may sign and record a notice of commencement denominated 'notice of commencement, lienor recording', stating:
(1)	A description sufficient to identify the real property being or intended to be improved;
(2)	The name and address of the record owner, against whom the notice of commencement is effective;
(3)	The name and address of the lienor recording the notice of commencement;
(4)	The name and address of the owner or other person with whom the lienor contracted with respect to the improvement;
(5)	The name and address of each contractor and subcontractor (if not the lienor) through which the lienor asserts its lien on real property;
(6)	A brief description of the labor, services, or materials furnished or to be furnished by the lienor for the improvement; and
(7)	The duration of the notice of commencement, which shall be one year.
The following form shall be sufficient:

'NOTICE OF COMMENCEMENT, LIENOR RECORDING
'PLEASE TAKE NOTICE that the lienor is entitled to a lien on real property and records this notice of commencement pursuant to G.S. 44A-10.2(b)	and (g).
1.	Description of the real property upon which the improvements are being or intended to be made (Street address, tax lot and block number, reference to recorded instrument, or other description of the real property is sufficient, whether or not it is specific, if it reasonably identifies what is described.):
	..........................................................................................................................................................................................................................................
2.	The name and address of the record owner against whom the notice of commencement is effective:
	..........................................................................................................................................................................................................................................
3.	The name and address of the lienor recording this notice of commencement:
	..........................................................................................................................................................................................................................................
4.	The name and address of the owner or other person with whom the lienor contracted with respect to the improvement:
	..........................................................................................................................................................................................................................................
5.	The name and address of each contractor and subcontractor (if not the lienor) through which the lienor asserts its lien on real property:
	..........................................................................................................................................................................................................................................
6.	A brief description of the labor, services, or materials furnished or to be furnished by the lienor for the improvement:
	..........................................................................................................................................................................................................................................
7.	Duration of this notice of commencement:  One year.

............(Insert name of lienor)...........
             Lienor

By:.............(signature)........................'

(c)	A lienor recording a notice of commencement shall send a copy of the notice to the record owner no later than the date it is recorded by depositing it in the United States mail, first class postage prepaid, addressed to the owner at the address shown on the tax records of the county in which the property is located, or by any other method of effecting its actual delivery.  The failure of the lienor to send the notice of commencement to the record owner shall not impair the effectiveness of the notice.
(d)	A notice of commencement recorded by an owner may state a duration of any period not in excess of three years after it is recorded, but if the duration stated is less than six months, the duration of the notice is six months after it is recorded.  If no duration is stated, the duration of the notice is one year after it is recorded.  The duration of a notice of commencement recorded by a lienor is one year after it is recorded, and any different duration stated in the notice is not effective.
(e)	The owner or the lienor who recorded a notice of commencement may extend its duration by signing and recording, before the notice lapses, a continuation statement that refers to the location in the record and date of recording of the notice of commencement and states the date to which duration of the notice is extended, which date shall be no more than one year from the date of the recording of that continuation statement.  An extended notice of commencement shall be effective as of the time of the recording of the original notice.  Continuation statements for successive terms may be recorded pursuant to this subsection.
(f)	The notice of commencement is effective only as to the contractor named in the notice and those persons claiming through that contractor.  In the case of multiple contracts with an owner for the same improvement, the notice shall be effective only as to the contractors named in the notice and those persons claiming through them.
(g)	The notice of commencement shall be recorded in the office of the register of deeds in each county where the improvement or any part of the improvement is located.  The register of deeds shall index the notice of commencement in the real property records under the name of the record owner of the real property at the time the notice is recorded, as grantor, and under the names of the contractor or contractors named in the notice, as grantee.
(h)	A notice of commencement shall be recorded prior to the issuance of a permit as provided by G.S. 153A-357(c) and G.S. 160A-417(c).
"§ 44A-10.3.  Termination of notice of commencement; request for notice.
(a)	The owner or the lienor who recorded a notice of commencement may terminate the notice as to all or any identified portion of the real property subject to the notice of commencement by:
(1)	Recording, in the office where the notice of commencement was recorded, a notice of termination denominated 'termination of notice of commencement' and containing:
a.	The information required by G.S. 44A-10.2(a) or (b) for a notice of commencement;
b.	A reference to the recorded notice of commencement by its location in the record and a statement of its date of recording;
c.	A statement of the effective date of the notice of termination, which may not be earlier than 30 days after the notice of termination is recorded; and
d.	If the notice of termination is intended to apply only to a portion of the real property subject to the notice of commencement, a statement of that fact and a description of the portion of the real property to which the notice of termination applies; and
(2)	Sending, at least 21 days before the effective date of the notice of termination, a copy of the notice of termination, showing the date it was recorded, to all persons who have requested that the person recording the notice of commencement notify them of the recording of a notice of termination.  The notice of termination shall be sent by depositing it in the United States mail, first class postage prepaid, addressed to the person to be notified, or by any other method effecting its actual delivery.  Either (i) a certificate of service and a receipt from the United States Post Office showing the person and address to which the notice was sent and the date of mailing or (ii) a receipt signed by the requestor dated not less than 10 days before the effective date of termination shall be proof that the notice of termination was timely sent.  Third parties shall be entitled to rely on such proof unless they have actual knowledge that the notice of termination was not sent.
(b)	Any person may request a copy of a notice of termination by recording a request for notice of termination in the office of the register of deeds in each county where the notice of commencement is recorded.  The request shall be indexed in the real property records under the name of the record owner as grantor and shall be described as 'Req. for N/T Book ......... Page ........'.  The following form shall be sufficient:

'REQUEST FOR NOTICE OF TERMINATION
OF NOTICE OF COMMENCEMENT

'The undersigned requests a copy of any Notice of Termination recorded with respect to the Notice of Commencement recorded in Book .......... at Page ........., ........................ County Registry.  The copy of the Notice of Termination shall be sent to the undersigned at the address indicated.

................................................................
Name of party requesting copy

........................................................................
Street address or post office box number

..........................................................
City, state, and zip code'

"§ 44A-11.  Perfecting a lien on real property.
Upon filing a lien on real property pursuant to G.S. 44A-12, the lien on real property is perfected as of the time set forth in G.S. 44A-10.1 and may be enforced pursuant to G.S. 44A-13.
"§ 44A-12. Filing a lien on real property.
(a)	Place of Filing. –A lien on real property shall be filed in the office of the clerk of superior court in each county where the real property subject to the lien on real property is located. The clerk of superior court shall note the lien on real property on the judgment docket and index the same under the name of the record owner of the real property at the time the lien on real property is filed. 
(b)	Time of Filing. –A lien on real property may be filed at any time after the contract for the improvement has been made  but not later than 120 days after the last furnishing of labor, services, or materials at the site of the improvement by or on behalf of the person claiming the lien on real property.
(c)	Contents of a Lien on Real Property. –A lien on real property shall be filed using a form substantially as follows:

'LIEN ON REAL PROPERTY
'PLEASE TAKE NOTICE that the lienor, being a contractor as defined by G.S. 44A-7 or a subcontractor asserting rights under G.S. 44A-18, claims a lien on the real property described below:
(1)	Name and address of the lienor:
	..........................................................................................................................................................................................................................................
(2)	Name and address of the record owner of the real property claimed to be subject to the lien on real property at the time the lien on real property is filed:
	..........................................................................................................................................................................................................................................
(3) 	Description of the real property subject to the lien on real property (Street address, tax lot and block number, reference to recorded instrument, or any other description of real property is sufficient, whether or not it is specific, if it  reasonably identifies what is described) :
	..........................................................................................................................................................................................................................................
(4) 	Name and address of the party with whom the lienor contracted for the furnishing of labor, services, or materials:
	..........................................................................................................................................................................................................................................
		(6) 	General description of the labor performed or to be performed, services rendered or to be rendered, or materials furnished or to be furnished, and the amount claimed or to be claimed for the labor, services, or materials, with principal and any interest stated separately:
	..........................................................................................................................................................................................................................................
(7)	Is this lien on real property being filed by a subcontractor in order to perfect the contractor's lien on real property, if any, pursuant to the rights of the subcontractor as provided in G.S. 44A-18, or to perfect a lien on real property to the extent of the direct liability of the owner, if any, under G.S. 44A-20(d)?  If so, check here [   ].

......(Insert name of lienor).......
Lienor

By: ............(signature).............

Filed this ..... day of..........., 19........................
.....................................................................................
Clerk of Superior Court'

A general description of the labor, services, or materials is sufficient. It is not necessary for a lienor to file an itemized list of labor, services, or materials.
(d)	No Amendment of Lien on Real Property; Multiple Filings. – A lien on real property filed under this Article may not be amended. A lienor may file subsequent liens on real property with respect to the same improvement and the same contract.  Any subsequent lien on real property shall be treated as a separate filing for purposes of priority and computation of periods of filing and enforcement of a lien on real property.
(e)	Notice of Assignment of Lien on Real Property. – When a lien on real property has been filed, it may be assigned of record by the lienor in a writing filed with the clerk of superior court who shall note the assignment in the margin of the judgment docket containing the lien on real property.  Thereafter the assignee becomes the lienor of record. In order for the assignment to be effective against the owner, the owner shall receive actual notice of the assignment.
	"§ 44A-13.  Action to enforce lien on real property.
(a)	Where and When Action Commenced. – An action to enforce a lien on real property may be commenced in any county where venue is otherwise proper.  The action shall be commenced not later than 180 days from the filing of the lien on real property.  The time within which to commence an action to enforce a lien on real property is not extended by virtue of a voluntary dismissal without prejudice taken under G.S. 1A-1, Rule 41(a). If the title to the real property against which the lien on real property is asserted is by law vested in a receiver or is subject to the control of a bankruptcy court, the lien on real property shall be enforced in accordance with the orders of the court having jurisdiction over the real property; the filing of a proof of claim in bankruptcy or with a receiver within the time required by this section satisfies the requirement for the commencement of a civil action and the filing of a notice of lis pendens.
(b)	Judgment. –A judgment enforcing a lien on real property may be entered for the amount shown to be due and shall bear interest as provided in G.S. 24-5.  The judgment shall direct a sale of the real property, shall specify the lien on real property to which the judgment relates, and shall state the priority date of the lien on real property.  To the extent that a judgment is entered for an amount in excess of the amount stated in the lien on real property plus interest, the excess shall not be enforced as a lien on real property but shall be a separate judgment enforceable under G.S. 1-233 and G.S. 1-234.
(c)	Notice of Action. –A notice of lis pendens shall be filed in each county in which the real property subject to the lien on real property is located, except the county in which the action is commenced.  The notice of lis pendens shall be filed within the time provided in subsection (a) of this section for the commencement of the action by the lienor. 
"§ 44A-14.  Sale of property in satisfaction of judgment enforcing lien on real property or upon order prior to judgment; distribution of proceeds.
(a)	Execution Sale; Effect of Sale. – Except as provided in subsection (b) of this section, sales under this Article and distribution of proceeds thereof shall be made in accordance with the execution sale provisions set out in G.S. 1-339.41 through 1-339.76.  The sale of real property to satisfy a lien on real property shall pass all title and interest of the owner to the purchaser, good against all claims or interests against which the lien on real property has priority under G.S. 44A-10.1, 44A-18.1, or 44A-20.1.
(b)	Sale of Property upon Order Prior to Judgment. – A resident judge of superior court in the district in which the action to enforce the lien on real property is pending, a judge regularly holding the superior courts of that district, any judge holding a session of superior court, either civil or criminal, in that district, a special judge of superior court residing in that district, or the chief judge of the district court in which the action to enforce the lien on real property is pending, may, upon notice to all interested parties and after a hearing thereupon and upon a finding that a sale prior to judgment is necessary to prevent substantial waste, destruction, depreciation or other damage to the real property prior to the final determination of the action, order any real property against which a lien on real property is asserted, sold in any manner determined by the judge to be commercially reasonable. The rights of all parties shall be transferred to the proceeds of the sale. Application for the order and further proceedings thereon may be heard in or out of session.
"§ 44A-15.  Attachment available to lienor.
In addition to other grounds for attachment, in all cases where the owner removes or attempts or threatens to remove an improvement from real property subject to a lien on real property, without the written permission of the lienor or with the intent to deprive the lienor of the lien on real property, the remedy of attachment of the property subject to the lien on real property shall be available to the lienor or any other person.
"§ 44A-16.  Discharge of record lien on real property.
(a)	A lien on real property is discharged by failure to enforce the lien on real property in accordance with G.S. 44A-13 within the time limitations prescribed in this Article.
(b)	A lien on real property is discharged in whole or, if so provided, in part, and the clerk of superior court shall cancel the lien of record to the extent discharged upon the request of any person, when:
(1) 	An instrument requesting that the lien on real property be discharged in whole or in part, signed by the lienor or the lienor's agent or attorney, and acknowledged before a person authorized to administer oaths, is filed with the clerk of superior court;
(2)	An instrument stating that the indebtedness secured by the lien on real property has been paid or discharged, signed by the lienor or the lienor's agent or attorney, and acknowledged before a person authorized to administer oaths, is filed with the clerk of superior court;
	(4)	The original or a certified copy of a final judgment or decree showing that the lienor's action to enforce the lien on real property has been dismissed with prejudice or otherwise finally determined adversely to the lienor, is filed with the clerk of superior court;
(5) 	A sum equal to one and one-fourth times the principal amount stated in the lien on real property, which shall be applied to the payment finally determined to be due, is deposited with the clerk of superior court; or
(6)	A corporate surety bond, in a sum equal to one and one-fourth times the principal amount stated in the lien on real property and conditioned upon the payment of the amount finally determined to be due in satisfaction of the lien on real property, is deposited with the clerk of superior court.
"Part 2.  Liens of 
Persons Furnishing Labor,
Services, or Materials Dealing with
a Person Other Than an Owner.
"§ 
					"§ 44A-18.  Subcontractors' liens; perfection; enforcement.
Subcontractors are entitled to liens provided by this section, subject to other requirements in this Article:
(1) 	First Tier Subcontractors.
a.	A first tier subcontractor shall be entitled to a lien on funds that are owed or become owed to the contractor with whom the first tier subcontractor dealt for the improvement on which the first tier subcontractor furnished labor, services, or materials.
b.	A first tier subcontractor, to the extent of that subcontractor's lien on funds provided in G.S. 44A-18(1)a., upon compliance with subdivision (7) of this section, may perfect and enforce the lien on real property of the contractor with whom the subcontractor dealt.  The first tier subcontractor's lien on real property under this sub-subdivision shall not exceed in amount the lesser of the lien on funds provided to the first tier subcontractor by G.S. 44A-18(1)a. or the amount of the contractor's lien on real property provided by G.S. 44A-8.
(2) 	Second Tier Subcontractors.
a.	A second tier subcontractor shall be entitled to a lien on funds that are owed or become owed to the first tier subcontractor with whom the second tier subcontractor dealt for the improvement on which the second tier subcontractor furnished labor, services, or materials. 
b.	A second tier subcontractor, to the extent of that subcontractor's lien on funds provided in G.S. 44A-18(2)a., upon compliance with subdivision (6) of this section, may perfect and enforce the lien on funds under G.S. 44A-18(1)a. of the first tier subcontractor with whom the second tier subcontractor dealt.  The second tier subcontractor's lien on funds under this sub-subdivision upon funds that are owed or become owed to the contractor by the owner shall not exceed in amount the lesser of (i) the lien on funds provided to the second tier subcontractor by G.S. 44A-18(2)a.; or (ii) the lien on funds provided to the first tier subcontractor by G.S. 44A-18(1)a.
c.	A second tier subcontractor, to the extent of that subcontractor's lien on funds provided in G.S. 44A-18(2)a., upon compliance with subdivision (7) of this section, may perfect and enforce the lien on real property that the first tier subcontractor with whom the second tier subcontractor dealt may enforce under G.S. 44A-18(1)b.  The second tier subcontractor's lien on real property under this sub-subdivision shall not exceed in amount the least of (i) the lien on funds provided to the second tier subcontractor by G.S. 44A-18(2)a.; (ii) the lien on funds provided to the first tier subcontractor by G.S. 44A-18(1)a.; or (iii) the amount of the contractor's lien on real property provided by G.S. 44A-8.
(3) 	Third Tier Subcontractors.
a.	A third tier subcontractor shall be entitled to a lien on funds that are owed or become owed to the second tier subcontractor with whom the third tier subcontractor dealt for the improvement on which the third tier subcontractor furnished labor, services, or materials. 
b.	A third tier subcontractor, to the extent of that subcontractor's lien on funds provided in G.S. 44A-18(3)a., upon compliance with subdivision (6) of this section, may perfect and enforce the lien on funds under G.S. 44A-18(2)a. of the second tier subcontractor with whom the third tier subcontractor dealt.  The third tier subcontractor's lien on funds under this sub-subdivision upon funds that are owed or become owed to the first tier subcontractor by the contractor shall not exceed in amount the lesser of (i) the lien on funds provided to the third tier subcontractor by G.S. 44A-18(3)a.; or (ii) the lien on funds provided to the second tier subcontractor by G.S. 44A-18(2)a.
c.	A third tier subcontractor, to the extent of that subcontractor's lien on funds provided in G.S. 44A-18(3)a., upon compliance with subdivision (6) of this section, may perfect and enforce the right of the second tier subcontractor under G.S. 44A-18(2)b. to enforce the lien on funds under G.S. 44A-18(1)a. of the first tier subcontractor with whom the second tier subcontractor dealt.  The third tier subcontractor's lien on funds under this sub-subdivision upon funds that are owed or become owed to the contractor by the owner shall not exceed in amount the least of (i) the lien on funds provided to the third tier subcontractor by G.S. 44A-18(3)a.; (ii) the lien on funds provided to the second tier subcontractor by G.S. 44A-18(2)a.; or (iii) the lien on funds provided to the first tier subcontractor by G.S. 44A-18(1)a.
d.	A third tier subcontractor, to the extent of that subcontractor's lien on funds provided in G.S. 44A-18(3)a., upon compliance with subdivision (7) of this section, may perfect and enforce the lien on real property that the second tier subcontractor with whom the third tier subcontractor dealt may enforce under G.S. 44A-18(2)c.  The third tier subcontractor's lien on real property under this sub-subdivision shall not exceed in amount the least of (i) the lien on funds provided to the third tier subcontractor by G.S. 44A-18(3)a.; (ii) the lien on funds provided to the second tier subcontractor by G.S. 44A-18(2)a.; (iii) the lien on funds provided to the first tier subcontractor by G.S. 44A-18(1)a.; or (iv) the amount of the contractor's lien on real property provided by G.S. 44A-8.
(4) 	Remote Tier Subcontractors. – Subcontractors more remote than the third tier who improve real property shall be entitled to a lien on funds that are owed or become owed to the person with whom the remote tier subcontractors dealt for the improvement on which the remote tier subcontractors furnished labor, services, or material, but the remote tier subcontractors shall not be entitled to enforce the liens of other persons.
(5) 	Amounts Secured by Lien on Funds. –A lien on funds under this section shall secure amounts earned by the lienor as a result of having furnished labor, services, or materials at the site of the improvement under the contract to improve real property, whether or not such amounts are due and whether or not performance or delivery is complete when notice is given to the obligor.
(6) 	Perfection and Enforcement of Lien on Funds. – A lien on funds under this section and all rights to enforce another's lien on funds are perfected upon giving notice in writing to any obligor against whom the lien is asserted as provided in G.S. 44A-19 and shall be effective upon the obligor's receipt of the notice. A lien on funds is enforced by a civil action and is subject to the statute of limitations in G.S. 1-52(2).
(7)	Perfection and Enforcement of a Lien on Real Property. – To perfect a lien on real property, the subcontractor shall file in the office of the clerk of superior court a lien on real property prepared in accordance with G.S. 44A-12 with a copy of the subcontractor's lien on funds prepared in accordance with G.S. 44A-19 and a certificate of service substantially as required by G.S. 44A-19(d).  Alternatively, the subcontractor may combine the lien on real property with the lien on funds in one form if the form contains the information required in G.S. 44A-12 and G.S. 44A-19 and includes a certificate of service  substantially as required by G.S. 44A-19(d).  The lien on real property under this subdivision may be filed at any time after the subcontractor's contract for the improvement of real property is made but not later than 120 days after the last furnishing of labor, services, or materials at the site of the improvement pursuant to the contractor's contract.  The action to enforce a lien on real property under this subdivision shall be commenced not later than 180 days from the date of the filing of the lien on real property by the subcontractor under this subdivision.  If an action is commenced prior to the time of the maturity of the owner's obligation to pay the contractor, the court, upon motion and hearing, shall order that the action be stayed until the maturity of the owner's obligation.  The priority of the lien on real property enforced by the subcontractor is governed by G.S. 44A-18.1.
(8)	No Prejudice to Subcontractor's Rights After Filing. – Upon the filing of a lien on real property by a subcontractor, no waiver, release, or subordination by an obligor nor any payment to an obligor shall be effective to prejudice the filing subcontractor's lien on real property without that subcontractor's written consent.
(9)	No Prejudice to Subcontractor's Rights After Notice. – Upon receipt by the obligor of notice of a subcontractor's lien on funds, no waiver, release, or subordination by an obligor, nor an payment to an obligor, shall be effective to prejudice the subcontractor's lien on funds.
"§ 44A-18.1.  Priority of a subcontractor's lien on real property by virtue of asserting the contractor's lien on real property.
(a)	General Priority. – Except as provided in subsection (b) of this section, the following rules apply to determining the priority of a subcontractor's lien on real property pursuant to G.S. 44A-18:
(1)	If there is an effective notice of commencement at the time a subcontractor files a lien on real property pursuant to G.S. 44A-18, the lien on real property has priority as of the time of the recording of the notice of commencement.
(2)	If there is no effective notice of commencement at the time a subcontractor files a lien on real property pursuant to G.S. 44A-18, the lien on real property has priority as of the earliest of the time of filing of (i) a lien on real property by the contractor through whom the subcontractor claims a lien on real property; (ii) a lien on real property by another subcontractor who claims a lien on real property through the same contractor; or (iii) the lien on real property by the subcontractor.
(b)	Priority Against a Subsequent Purchaser That is a Protected Party. – Whether or not a notice of commencement has been filed and whether or not any other contractor's or any other subcontractor's lien on real property has been filed under this Article, in order for a subcontractor's lien on real property pursuant to G.S. 44A-18 to have priority over the interest of a subsequent purchaser that is a protected party or a successor in interest to the subsequent purchaser, the subcontractor's lien on real property shall be filed before the document conveying an interest in the real property to the protected party is recorded.
"§ 44A-19.  Notice to obligor.
(a)	Notice to obligors shall be given by serving a subcontractor's lien on funds which shall set forth:
(1)	The name and address of the person claiming the lien on funds(lienor);
(2) 	A general description of the real property improved;
(3) 	The name and address of the person with whom the lienor contracted to improve real property;
(4)	The name and address of the owner and each contractor or subcontractor against or through whom the lienor makes this claim;
(5) 	A general description of the lienor's contract; and
(6) 	The amount claimed by the lienor under the lienor's contract.
(b)	All liens on funds given to obligors by first, second or third tier subcontractors shall be given using a form substantially as follows:

'SUBCONTRACTOR'S LIEN ON FUNDS
'PLEASE TAKE NOTICE that the lienor claims a lien on funds owed to the contractor and to each subcontractor against or through whom this claim is made.  Upon receipt of this lien on funds you may not make any further payments to any of these parties unless you retain from those payments an amount sufficient to satisfy this lien on funds.  Failure to withhold sums as required may result in direct liability to the lienor.

To:
1. 	, owner of property involved.
(Name and address)
2. 	, general contractor.
(Name and address)
3.  	, first tier subcontractor
(Name and address)	   against or through
	   whom 
   lienor claims, if any.
4. 	, second tier subcontractor
(Name and address)	   against or through whom
   lienor claims, if any.
General description of real property where labor performed, services rendered, or material furnished:

General description of lienor's contract including the names of the parties thereto:

The amount of lien on funds claimed pursuant to the 
lienor's contract:            $...............................
The lienor gives this Subcontractor's Lien on Funds pursuant to North Carolina law and claims all rights to which the lienor is entitled.
Dated:..........................
.......(Insert name of lienor).......
            Lienor

By: .........(Signature).............

..........................................
    (Address)'

(c)	All liens on funds given to obligors by subcontractors more remote than the third tier shall be given using a form substantially as follows:

'LIEN ON FUNDS BY SUBCONTRACTOR
MORE REMOTE THAN THE THIRD TIER
'PLEASE TAKE NOTICE that the lienor claims a lien on funds owed to the subcontractor with whom the lienor dealt.  Upon receipt of this lien on funds you may not make any further payment to the named subcontractor unless you retain from those payments an amount sufficient to satisfy this lien on funds.  Failure to withhold sums as required may result in your direct liability to the lienor.

To:
, person holding funds against which                        (Name and Address)  lien on funds  is claimed.

General description of real property where labor performed, services rendered, or material furnished:

General description of lienor's contract including the names of the parties thereto:

The amount of lien on funds claimed pursuant to the above
described contract:	$ ........................
The lienor gives this Subcontractor's Lien on Funds pursuant to North Carolina law and claims all rights to which the lienor is entitled.
Dated: ........................
	......................, 
	............(Insert name of lienor)............
	           Lienor
                                                                                                                                                                                                                                                                By: ..........(Signature)..............

	.....................................
	 (Address)'

(d)	A subcontractor's lien on funds under this section shall be served upon the obligor in person by any person, by certified mail, or in any other manner authorized by the North Carolina Rules of Civil Procedure. A copy of the subcontractor's lien on funds and a certificate of service shall be attached to any lien on real property filed pursuant to G.S. 44A-18 or G.S. 44A-20(d). The certificate of service shall be in a form substantially as follows:
'STATE OF NORTH CAROLINA
'COUNTY OF .....................

'On this ............. day of ..........., 19......., I, ............(name), being the ............ (title or capacity of signor), of .........................., lienor, served a copy of the foregoing Subcontractor's Lien on Funds, upon ................. (name of obligor) by .................... (hand delivery, certified mail, or in any other manner authorized by the North Carolina Rules of Civil Procedure).

.......................(signature).....................'

	(e)  A subcontractor's lien on funds is not required to be filed in the office of the clerk of superior court to be effective against the funds.
"§ 44A-20. Duties and liability of obligor.
(a)	Upon receipt of the lien on funds as provided for in this Part, the obligor shall be under a duty to withhold from all further payments a sum sufficient to satisfy the lien or liens on funds that have been received.
		(b1)  The obligor shall be directly liable to the person or persons entitled to liens on funds under this Part up to the amount of funds that the obligor is required to but fails to withhold under this section.
(b2)	If, after receipt of the lien on funds, the obligor makes further payment to a contractor or subcontractor against whose interest the lien or liens on funds are claimed without complying with subsection (a) of this section, the lien on funds shall continue upon the funds in the hands of the contractor or subcontractor who received the payment.
(c)	If an obligor makes a payment after receipt of a lien on funds and incurs direct liability therefor, the obligor is entitled to reimbursement and indemnification from the party receiving the payment.
(d)	If the obligor is an owner of the property being improved, the lienor is entitled to a lien on real property of the obligor to the extent of the owner's direct liability under subsection (b1) of this section.  The lien on real property under this subsection may be filed at any time after the subcontractor's contract for the improvement of real property is made but not later than 120 days after the last furnishing of labor, services, or materials at the site of the improvement pursuant to the contractor's contract. The lien on real property shall be in the form set out in G.S. 44A-12(c) and shall include, in addition, a copy of the subcontractor's lien on funds given pursuant to G.S. 44A-19 together with a certificate of service substantially in the form specified by G.S. 44A-19(d) and shall include the information for subcontractors required by G.S. 44A-12(c)(7).  The action to enforce a lien on real property under this subsection shall be commenced not later than 180 days from the date of the filing of the lien on real property by the subcontractor under this subsection.  The priority of a subcontractor's direct lien on real property pursuant to this section is provided by G.S. 44A-20.1.
"§ 44A-20.1.  Priority of a subcontractor's direct liability lien on real property.
The priority of a subcontractor's lien on real property arising pursuant to G.S. 44A-20(d)	shall be governed by G.S. 44A-10.1, and all references in G.S. 44A-10.1 to 'contractor's lien on real property' shall be interpreted to mean 'subcontractor's lien on real property'.
"§ 44A-21.  Pro rata payments.
In the event that the funds in the hands of the obligor and the obligor's direct liability, if any, under G.S. 44A-20, are less than the principal amount and interest of valid liens on funds that have been received by the obligor under this Part, the parties entitled to liens on funds  shall share the funds on a pro rata basis.  The principal amount of valid liens shall be paid first, without interest being considered on the proration.  Any remaining funds shall be prorated among the valid lienors on the basis of the remaining outstanding lien balance due each.
"§ 44A-22.  Priority of liens on funds.
Liens on funds perfected under this Part have priority over all other interests or claims theretofore or thereafter created or suffered in the funds by the person against whose interest the lien on funds is served, including, but not limited to, liens arising from garnishment, attachment, levy, judgment, assignments, security interests, and any other type of transfer, whether voluntary or involuntary.  Any security interest, whether or not perfected, granted by the person against whose interest the lien on funds is served, any lien of a judgment creditor with levy of attachment or garnishment of the interest of the person against whom the lien on funds is served, and the interest of any purchaser for value, with or without notice, from the person against whom the lien on funds is served shall be inferior to the lien on funds to the extent that funds exist in the hands of the obligor at the time of service of the lien on funds.  Any person who receives payment from an obligor with knowledge of a lien on funds shall take such payment subject to the lien on funds.
"§ 

	

	

	

	

	

	"§ 44A-23.1.  Assignment of subcontractor's lien on funds.
When a subcontractor's lien on funds has been served, the lien on funds may be assigned by the lienor by a dated, notarized instrument which shall state the assignment.  The assignment shall be served upon the same parties as those required under G.S. 44A-19(d)	and by the method required by this Article.  Thereafter the assignee becomes the lienor.
"Part 3.  Criminal Sanctions for Furnishing
a False Statement in Connection with
Improvement to Real Property.
"§ 44A-24.  False statement a misdemeanor.
	If any contractor or other person receiving payment from an obligor for an improvement to real property or from a purchaser for a conveyance of real property with improvements shall knowingly furnish to the obligor, purchaser, or to a lender who obtains a security interest in the real property, or to a title insurance company insuring title to the real property, a false written statement of the sums due or claimed to be due for labor, services, or material furnished at the site of improvements to the real property, then the contractor, subcontractor or other person shall be guilty of a Class 1 misdemeanor.  Upon conviction and in the event the court shall grant any defendant a suspended sentence, the court may in its discretion include as a condition of the suspension a provision that the defendant shall reimburse the party who suffered loss on such conditions as the court shall determine are proper.
The elements of the offense herein stated are the furnishing of the false written statement with knowledge that it is false and the subsequent or simultaneous receipt of payment from an obligor or purchaser, and in any prosecution hereunder it shall not be necessary for the State to prove that the obligor, purchaser, lender or title insurance company relied upon the false statement or that any person was injured thereby."
Sec. 2.  G.S. 153A-357 reads as rewritten:
"§ 153A-357.  Permits.
(a)	No person may commence or proceed with:
(1)	The construction, reconstruction, alteration, repair, movement to another site, removal, or demolition of any building;
(2) 	The installation, extension, or general repair of any plumbing system;
(3) 	The installation, extension, alteration, or general repair of any heating or cooling equipment system; or
(4) 	The installation, extension, alteration, or general repair of any electrical wiring, devices, appliances, or equipment
without first securing from the inspection department with jurisdiction over the site of the work each permit required by the State Building Code and any other State or local law or local ordinance or regulation applicable to the work.  A permit shall be in writing and shall contain a provision that the work done shall comply with the State Building Code and all other applicable State and local laws and local ordinances and regulations.  No permit may be issued unless the plans and specifications are identified by the name and address of the author thereof; and if the General Statutes of North Carolina require that plans for certain types of work be prepared only by a registered architect or registered engineer, no permit may be issued unless the plans and specifications bear the North Carolina seal of a registered architect or of a registered engineer.  If a provision of the General Statutes of North Carolina or of any ordinance requires that work be done by a licensed specialty contractor of any kind, no permit for the work may be issued unless the work is to be performed by such a duly licensed contractor.  No permit issued under Articles 9 or 9C of G.S. Chapter 143 shall be required for any construction, installation, repair, replacement, or alteration costing five thousand dollars ($5,000) or less in any single-family residence or farm building unless the work involves:  the addition, repair or replacement of load bearing structures; the addition (excluding replacement of same size and capacity) or change in the design of plumbing; the addition, replacement or change in the design of heating, air conditioning, or electrical wiring, devices, appliances, or equipment; the use of materials not permitted by the North Carolina Uniform Residential Building Code; or the addition (excluding replacement of like grade of fire resistance) of roofing.  Violation of this section constitutes a Class 1 misdemeanor.
(b)	No permit shall be issued pursuant to subsection (a) of this section for any land-disturbing activity, as defined in G.S. 113A-52(6), for any activity covered by G.S. 113A-57, unless an erosion control plan has been approved by the Sedimentation Pollution Control Commission pursuant to G.S. 113A-54(d)(4) or by a local government pursuant to G.S. 113A-61 for the site of the activity or a tract of land including the site of the activity.
(c)	No permit shall be issued pursuant to subsection (a) of this section unless a copy of the notice of commencement with respect to the work pursuant to G.S. 44A-10.2, with evidence of its recording by the register of deeds in the county where the permit is to be issued, is submitted with the application for the permit.  A copy of the notice of commencement and evidence of its recording shall be retained in the file."
Sec. 3.  G.S. 160A-417 reads as rewritten:
"§ 160A-417.  Permits.
(a)	No person shall commence or proceed with:
(1)	The construction, reconstruction, alteration, repair, movement to another site, removal, or demolition of any building or structure,
(2)	The installation, extension, or general repair of any plumbing system,
(3)	The installation, extension, alteration, or general repair of any heating or cooling equipment system, or
(4)	The installation, extension, alteration, or general repair of any electrical wiring, devices, appliances, or equipment,
without first securing from the inspection department with jurisdiction over the site of the work any and all permits required by the State Building Code and any other State or local laws applicable to the work.  A permit shall be in writing and shall contain a provision that the work done shall comply with the State Building Code and all other applicable State and local laws.  No permits shall be issued unless the plans and specifications are identified by the name and address of the author thereof, and if the General Statutes of North Carolina require that plans for certain types of work be prepared only by a registered architect or registered engineer, no permit shall be issued unless the plans and specifications bear the North Carolina seal of a registered architect or of a registered engineer.  When any provision of the General Statutes of North Carolina or of any ordinance requires that work be done by a licensed specialty contractor of any kind, no permit for the work shall be issued unless the work is to be performed by such a duly licensed contractor.  No permit issued under Articles 9 or 9C of Chapter 143 shall be required for any construction, installation, repair, replacement, or alteration costing five thousand dollars ($5,000) or less in any single family residence or farm building unless the work involves:  the addition, repair or replacement of load bearing structures; the addition (excluding replacement of same size and capacity) or change in the design of plumbing; the addition, replacement or change in the design of heating, air conditioning, or electrical wiring, devices, appliances, or equipment; the use of materials not permitted by the North Carolina Uniform Residential Building Code; or the addition (excluding replacement of like grade of fire resistance) of roofing.  Violation of this section shall constitute a Class 1 misdemeanor.
(b)	No permit shall be issued pursuant to subsection (a) of this section for any land-disturbing activity, as defined in G.S. 113A-52(6), for any activity covered by G.S. 113A-57, unless an erosion control plan has been approved by the Sedimentation Pollution Control Commission pursuant to G.S. 113A-54(d)(4) or by a local government pursuant to G.S. 113A-61 for the site of the activity or a tract of land including the site of the activity.
(c)	No permit shall be issued pursuant to subsection (a) of this section unless a copy of the notice of commencement with respect to the work pursuant to G.S. 44A-10.2, with evidence of its recording by the register of deeds in the county where the permit is to be issued, is submitted with the application for the permit.  A copy of the notice of commencement and evidence of its recording shall be retained in the file."
Sec. 4.  G.S. 44A-35 reads as rewritten:
"§ 44A-35.  Attorneys' fees.
	In any suit brought or defended under the provisions of Article 2 or Article 3 of this Chapter, the presiding judge may allow a reasonable attorneys' fee to the attorney representing the prevailing party only where there is privity of contract between the prevailing party and the losing party.  For purposes of this section, a claimant under a payment bond shall be deemed to be in privity of contract with the surety.  The attorneys' fee is to be taxed as part of the court costs and be payable by the losing party upon a finding that there was an unreasonable refusal by the losing party to fully resolve the matter which constituted the basis of the suit or the basis of the defense.  For purposes of this section, 'prevailing party' is a party plaintiff or third party plaintiff who obtains a judgment of at least fifty percent (50%) of the monetary amount sought in a claim or is a party defendant or third party defendant against whom a claim is asserted which results in a judgment of less than fifty percent (50%) of the amount sought in the claim defended. Notwithstanding the foregoing, in the event an offer of judgment is served in accordance with G.S. 1A-1, Rule 68, a 'prevailing party' is an offeree who obtains judgment in an amount more favorable than the last offer or is an offeror against whom judgment is rendered in an amount less favorable than the last offer."
Sec. 5.  Section 4 of Chapter 1010 of the 1991 Session Laws reads as rewritten:
"Sec. 4.  Section 1 of this act is effective upon ratification and applies to actions filed on or after the date of ratification.  Section 2 of this act is effective upon ratification.  Section 3 of this act is effective upon ratification and applies to actions filed on or after the date of ratification."
Sec. 6.  The Revisor of Statutes shall cause to be printed along with this act all explanatory comments of the drafters of this act as the Revisor may deem appropriate.
Sec. 7.  Sections 1, 2, and 3 of this act become effective July 1, 1995, and apply to liens on real property filed and liens on funds served on and after July 1, 1995.  Claims of lien filed with the clerk of superior court under G.S. 44A-12 prior to July 1, 1995, shall be enforced in accordance with the law in effect at the time of filing.  Notices of claims of lien served under G.S. 44A-19 prior to July 1, 1995, shall be enforced in accordance with the law in effect at the time of service, including the applicable provisions of G.S. 44A-23.  Sections 4 and 5 of this act become effective July 1, 1994.  The remainder of this act is effective upon ratification.