GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1995

S	1 

SENATE BILL 1091

Short Title:  Amend Real Property Lien Law.	(Public)

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Sponsors: Senators Ballantine and Rand. 

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Referred to:  Judiciary I/Constitution

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May 4, 1995

A BILL TO BE ENTITLED
AN ACT TO AMEND ARTICLE 2 OF CHAPTER 44A OF THE GENERAL STATUTES REGARDING LIENS ON REAL PROPERTY.
The General Assembly of North Carolina enacts:
Section 1.  (a) The title of Article 2 of Chapter 44A of the General Statutes reads as rewritten:
"ARTICLE 2. 
" Liens on Real Property and on Funds."
(b) The title of Part 1 of Article 2 of Chapter 44A of the General Statutes reads as rewritten:
"Part 1. General Provisions: Liens of 
Persons Furnishing Labor,
Services, Materials, and Equipment."
Sec. 2.  G.S. 44A-7 reads as rewritten:
"§ 44A-7.  Definitions.
Unless the context otherwise requires in this Article:
(1)	'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, or supplying rental equipment, tools, appliances or machinery or the reasonable value of the use of equipment utilized on the real property for the improvement, 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.
(2)	'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.
(3)	An 'owner' is a person who has an interest in the real property improved 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.
(4)	'Real property' means the real estate that is improved, including lands, leaseholds, tenements and hereditaments, and improvements placed thereon.
(5)	'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."
Sec. 3.  G.S. 44A-8 reads as rewritten:
"§ 44A-8. Mechanics', laborers' and materialmen's lien; persons entitled to lien.
Any person who performs or furnishes labor or professional design or surveying services or furnishes materials or supplying of rental equipment, tools, appliances or machinery or the reasonable value of the use of equipment utilized on the real property for the improvement, pursuant to a contract, either express or implied, with the owner of real property for the making of an improvement thereon shall, upon complying with the provisions of this Article, have a lien on such real property to secure payment of all debts owing for labor done or professional design or surveying services or material furnished pursuant to such contract."
Sec. 4.  G.S. 44A-10 reads as rewritten:
"§ 44A-10. Effective date of liens.
Liens granted by this Article shall relate to and take effect from the time of the first acts to improve the real property by the person claiming the lien."
Sec. 5.  G.S. 44A-12 reads as rewritten:
"§ 44A-12. Filing claim of lien.
(a)	Place of Filing. – All claims of lien against any real property must be filed in the office of the clerk of superior court in each county wherein the real property subject to the claim of lien is located. The clerk of superior court shall note the claim of lien on the judgment docket and index the same under the name of the record owner of the real property at the time the claim of lien is filed. An additional copy of the claim of lien may also be filed with any receiver, referee in bankruptcy or assignee for benefit of creditors who obtains legal authority over the real property.
(b)	Time of Filing. – Claims of lien may be filed at any time before or after the maturity of the obligation secured thereby but not later than 120 days after the last acts to improve the real property by the person claiming the lien.
(c)	Contents of Claim of Lien on Real Property to Be Filed. –A claim of lien on real property must be filed using a form substantially as follows:

LIEN ON REAL PROPERTY

(1) 	Name and address of the person claiming the lien:
(2) 	Name and address of the record owner of the real property claimed to be subject to the lien at the time the claim of lien is filed:
(3) 	Description of the real property upon which the lien is claimed: (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 person with whom the claimant contracted to improve real property:
(5) 	Date upon which acts to improve real property were first furnished upon said property by the claimant:
(5a) 	Date upon which acts to improve real property were last furnished upon said property by the claimant:
(6) 	General description of the acts to improve real property (it is not necessary that the lien claimant file an itemized list or description of act to improve real property):
(7)	Principal amount claimed:

                                          ......................
                                               Lien Claimant    
	Filed this ..... day of..........., 19............
	..................................................
Clerk of Superior Court
A general description of the acts to improve real property is sufficient. It is not necessary for lien claimant to file an itemized list of specific acts to improve real property.
(d)	No Amendment of Claim of Lien. – A claim of lien may not be amended. A claim of lien may be cancelled by a claimant or his authorized agent or attorney and a new claim of lien substituted therefor within the time herein provided for original filing.
(e)	Notice of Assignment of Claim of Lien. – When a claim of lien has been filed, it may be assigned of record by the lien claimant in a writing filed with the clerk of superior court who shall note said assignment in the margin of the judgment docket containing the claim of lien. Thereafter the assignee becomes the lien claimant of record.
(f)	Waiver of Right to File or Claim Liens as Consideration for Contract Against Public Policy. – An agreement to waive the right to file or claim a lien granted under this Article, which agreement is in anticipation of and in consideration for the awarding of any contract, either expressed or implied, for the making of an improvement upon real property under this Article is against public policy and is unenforceable. This section does not prohibit subordination or release of a lien granted under this Article.  A waiver or release of a lien on real property following the awarding of any contract for the improvement to real property requires full consideration of the contract amount."
Sec. 6.  G.S. 44A-13 reads as rewritten:
"§ 44A-13. Action to enforce lien.
(a)	Where and When Action Instituted. – An action to enforce the lien created by this Article may be instituted in any county in which the lien is filed. No such action may be commenced later than 180 days after the last furnishing of labor or materials at the site of the improvement by the person claiming the lien.  The time within which to commence an action to enforce a lien on real property is 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 is asserted is by law vested in a receiver or trustee in bankruptcy, the lien shall be enforced in accordance with the orders of the court having jurisdiction over said real property; and 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 by filing a complaint.
(b)	Judgment. – Judgment enforcing a lien under this Article may be entered for the principal amount as stated in the claim of lien and shown to be due plus interest at the contract rate and court costs.  The judgment shall direct a sale of the real property subject to the lien thereby enforced.
(c)	Notice of Action. – Unless the action enforcing the lien created by this Article is instituted in the county in which the lien is filed, in order for the sale under the provisions of G.S. 44A-14(a) to pass all title and interest of the owner to the purchaser good against all claims or interests recorded, filed or arising after the first furnishing of labor or materials at the site of the improvement by the person claiming the lien, a notice of lis pendens shall be filed in each county in which the real property subject to the lien is located within 180 days after the last furnishing of labor or materials at the site of the improvement by the person claiming the lien. It shall not be necessary to file a notice of lis pendens in the county in which the action enforcing the lien is commenced in order for the judgment entered therein and the sale declared thereby to carry with it the priorities set forth in G.S. 44A-14(a). If neither an action nor a notice of lis pendens is filed in each county in which the real property subject to the lien is located within 180 days after the last furnishing of labor or materials at the site of the improvement by the person claiming the lien, as to real property claimed to be subject to the lien in such counties where the action was neither commenced nor a notice of lis pendens filed, the judgment entered in the action enforcing the lien shall not direct a sale of the real property subject to the lien enforced thereby nor be entitled to any priority under the provisions of G.S. 44A-14(a), but shall be entitled only to those priorities accorded by law to money judgments."
Sec. 7.  G.S. 44A-16 reads as rewritten:
"§ 44A-16. Discharge of record lien.
Any lien filed under this Article may be discharged by any of the following methods:
(1) 	The lien claimant of record, his agent or attorney, in the presence of the clerk of superior court may acknowledge the satisfaction of the lien indebtedness, whereupon the clerk of superior court shall forthwith make upon the record of such lien an entry of such acknowledgment of satisfaction, which shall be signed by the lien claimant of record, his agent or  attorney, and witnessed by the clerk of superior court.
(2) 	The owner may exhibit an instrument of satisfaction signed and acknowledged by the lien claimant of record which instrument states that the lien indebtedness has been paid or satisfied, whereupon the clerk of superior court shall cancel the lien by entry of satisfaction on the record of such lien.
(3) 	By failure to enforce the lien within the time prescribed in this Article.
(4) 	By filing in the office of the clerk of superior court the original or certified copy of a judgment or decree of a court of competent jurisdiction showing that the action by the claimant to enforce the lien has been dismissed or finally determined adversely to the claimant.
(5) 	Whenever 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 court.
(6) 	Whenever a corporate surety bond, in a sum equal to one and one-fourth times the amount of the lien or liens stated in the lien on real property and conditioned upon the payment of the amount finally determined to be due in satisfaction of said lien or liens, is deposited with the clerk of court, whereupon the clerk of superior court."
Sec. 8.  The title of Part 2 of Article 2 of Chapter 44A of the General Statutes reads as rewritten:
"Part 2. Liens of 
Persons Furnishing Labor, Services, Materials,
and Equipment; Dealing with a Person Other Than an Owner."
Sec. 9.  G.S. 44A-18 reads as rewritten:
"§ 44A-18. Grant of lien; subrogation; perfection.
Upon compliance with this Article:
(1) 	A first tier subcontractor who furnished labor, materials, or the rental of equipment at the site of the improvement shall be entitled to a lien upon funds which are owed to the contractor with whom the first tier subcontractor dealt and which arise out of the improvement on which the first tier subcontractor worked or furnished materials.
(2) 	A second tier subcontractor who furnished labor, materials, or the rental of equipment at the site of the improvement shall be entitled to a claim of lien upon funds which are owed to the first tier subcontractor with whom the second tier subcontractor dealt and which arise out of the improvement on which the second tier subcontractor worked or furnished materials. A second tier subcontractor, to the extent of his lien provided in this subdivision, shall also be entitled to be subrogated to the lien of the first tier subcontractor with whom he dealt provided for in subdivision (1) and shall be entitled to perfect it by notice to the extent of his claim.
(3) 	A third tier subcontractor who furnished labor, materials, or the rental of equipment at the site of the improvement shall be entitled to a claim of lien upon funds which are owed to the second tier subcontractor with whom the third tier subcontractor dealt and which arise out of the improvement on which the third tier subcontractor worked or furnished materials. A third tier subcontractor, to the extent of his lien provided in this subdivision, shall also be entitled to be subrogated to the lien of the second tier subcontractor with whom he dealt and to the lien of the first tier subcontractor with whom the second tier subcontractor dealt to the extent that the second tier subcontractor is entitled to be subrogated thereto, and in either case shall be entitled to perfect the same by notice to the extent of his claim.
(4) 	Subcontractors more remote than the third tier who furnished labor, materials, or the rental of equipment at the site of the improvement shall be entitled to a claim of lien upon funds which are owed to the person with whom they dealt and which arise out of the improvement on which they furnished labor or material, but such remote tier subcontractor shall not be entitled to subrogation to the rights of other persons.
(5) 	The claim of lien on funds granted under this section shall secure amounts claimed by the lien claimant as a result of his having furnished labor, materials, or rental equipment at the site of the improvement under the contract to improve real property, including interest at the contract rate, whether or not such amounts are due and whether or not performance or delivery is complete when notice is given to the obligor.
(6) 	A lien upon funds granted under this section is perfected upon the giving of notice in writing to the obligor as provided in G.S. 44A-19 and shall be effective upon the obligor's receipt of the notice. The subrogation rights of a first, second, or third tier subcontractor to the lien of the contractor created by Part 1 of Article 2 of this Chapter are perfected as provided in G.S. 44A-23.  A claim of lien on funds shall apply to public contracts for the improvement of real property; a claim of lien on funds may be enforced against the State of North Carolina, its agencies, municipalities, counties, and other political subdivisions as an obligor; however, no lien on real property may exist against real property owned by the State of North Carolina, its agencies, municipalities, counties and other political subdivisions.  This section does not prohibit nor limit any rights to payment pursuant to Article 3 of this Chapter.
(7)	Upon filing of a lien on real property and serving a lien on funds by a subcontractor, no waiver, release or subordination by any obligor nor any payment by or to any obligor shall be effective to prejudice the subcontractor's lien on real property without the subcontractor's written consent."
Sec. 10.  G.S. 44A-19 reads as rewritten:
"§ 44A-19. Notice to obligor.
(a)	Notice of a claim of lien shall set forth:
(1) 	The name and address of the person claiming the lien,
(2) 	A general description of the real property improved,
(3) 	The name and address of the person with whom the lien claimant contracted to improve real property,
(4) 	The name and address of each person against or through whom subrogation rights are claimed,
(5) 	A general description of the contract and the person against  whose interest the lien is claimed, and
(6) 	The amount claimed by the lien claimant under his contract.
(b)	Notices of claims of liens by first, second or third tier subcontractors must be given using a form substantially as follows:

NOTICE OF CLAIM OF LIEN ON FUNDS AND ON REAL PROPERTY BY
FIRST, SECOND OR THIRD TIER SUBCONTRACTOR

To:
1.	,	owner of property involved.
    (Name and address)
2.	,	general contractor.
    (Name and address)
3.	,	first tier subcontractor against
    (Name and address)	or through whom subrogation                                 is claimed, if any.
4.	,	second tier subcontractor against
   (Name and address)	or through whom subrogation is    claimed, if any.
General description of real property where acts to improve real property were furnished:

General description of undersigned lien claimant's contract including the names of the parties thereto:

   The amount of lien claimed pursuant to the above
described contract:	$
   The undersigned lien claimant gives this notice of claim of lien pursuant to North Carolina law and claims all rights of subrogation to which he is entitled under Part 2 of Article 2 of Chapter 44A of the General Statutes of North Carolina.
Dated
	, Lien Claimant                                 
     (Address)
(c)	Notices of claims of liens by subcontractors more remote than the third tier must be given using a form substantially as follows:

NOTICE OF CLAIM OF LIEN BY SUBCONTRACTOR 
MORE REMOTE THAN THE THIRD TIER 

To:
	, person holding funds against which lien is claimed.
(Name and Address)
General description of real property where acts to improve provided:

General description of undersigned lien claimant's contract including the names of the parties thereto:

   The amount of lien claimed pursuant to the above
described contract:            $
The undersigned lien claimant gives this notice of claim of lien pursuant to North Carolina law and claims all rights of subrogation to which he is entitled under Part 2 of Article 2 of Chapter 44A of the General Statutes of North Carolina.
Dated: .................
	,  Lien Claimant

       (Address)
(d)	Notices under this section shall be served upon the obligor in person or by certified mail in any manner authorized by the North Carolina Rules of Civil Procedure. A copy of the notice shall be attached to any claim of lien filed pursuant to G.S. 44A-20(d)."
Sec. 11.  G.S. 44A-21 reads as rewritten:
"§ 44A-21. Pro rata payments.
In the event that the funds in the hands of the obligor and the obligor's personal liability, if any, under G.S. 44A-20 are less than the amount of valid lien claims that have been filed with the obligor under this Article the parties entitled to liens shall share the funds on a pro rata basis."
Sec. 12.  G.S. 44A-23 reads as rewritten:
"§ 44A-23.  Contractor's lien; waiver or release; subrogation rights of subcontractor.
	A first, second, or third tier subcontractor, who gives notice as provided in this Article, may, to the extent of his claim, enforce the lien of the contractor created by Part 1 of Article 2 of this Chapter. The manner of such enforcement shall be as provided by G.S. 44A-7 through 44A-16. The lien is perfected as of the time set forth in G.S. 44A-10 upon filing of claim of lien pursuant to G.S. 44A-12. Upon the filing of a lien on real property by a subcontractor, no waiver, release or subordination by any obligor nor any payment by or to any obligor shall be effective to prejudice the filing subcontractor's lien on real property without the filing subcontractor's written consent.  A waiver or release of a lien on real property following the awarding of any contract for the improvement to real property requires full consideration of the contract amount.

				

					
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Sec. 13.  This act is effective upon ratification.