If you are an owner or general contractor in North Carolina, engaged in the business of development and construction, you want to protect your property from construction liens. Under Chapter 44A of the North Carolina General Statutes, contractors, subcontractors and suppliers have potential lien rights on real property.
Once liens are filed, they can delay and/or add enormous expense to a project. While you cannot eliminate the risk of all liens on real property in a project, you can prevent some of them by following the statutory process for filing a Notice of Contract.
Notice of Contract
As an owner or a general contractor, if you are engaged in a private construction project on real property, you want to file a Notice of Contract. Any decent sized construction project is going to have second tier and lower – suppliers and subcontractors that are providing work to the project. If you are the owner or general contractor, you want to eliminate their rights to have a lien on the real property.
If a Notice of Contract is properly filed and posted, it will cut off any second tier or lower supplier’s or subcontractor’s right to assert a lien on the real property. This is a substantial benefit to the owner and general contractor, because it eliminates potential real property liens that can substantially delay a project.
Filing and Posting Requirements
If you are the owner or general contractor you must file a Notice of Contract within 30 days of the award of the contract to the general contractor or the issuance of the building permit – whichever is later.
The Notice of Contract must follow the statutory form and be filed with the Office of the Clerk of Court in the county where the property is located. It also must be posted at the jobsite – in a location adjacent to the building permit.
Documentation of Filing
Once the Notice of Contract is filed and posted, the owner and/or general contractor should document the filing by keeping a filed stamped copy for their records and should photograph the posted Notice at the jobsite in case it is ever removed.
What Happens Next
After the Notice of Contract is posted, subcontractors and suppliers may send a notice of subcontract to the general contractor. If this happens, the general contractor must send notices of payment to these subcontractors and suppliers, before the general contractor pays the first tier subcontractor. If the general contractor fails to do this, it may nullify the Notice of Contract and the lien protections. If you are the owner of the property, you should make sure that your general contractor is complying with all the requirements of the statutes.
If you have questions about the Notice to Contract or other contract or commercial real estate questions, contact our office to set up a time to discuss your questions.