As of April 1, 2013, North Carolina Gen. Stat. § 44A-23 – the statute that sets forth the manner in which subcontractors can exercise lien rights on lien property – has been modified slightly. One change relates to the impact of a lien waiver by the general contractor. The current version of the statute eliminates the right of a subcontractor to utilize the lien rights of the general contractor if the GC executes a lien waiver to the homeowner. “This creates problems with contractors execute lien waivers in order to be entitled to their draw from a bank/builder. To understand your lien rights as a subcontractor, contact Maginnis Law, PLLC today at 919.526.0450 or submit a new case inquiry here.
Unfortunately, many subcontractors are still unaware of what sort of lien rights they have under North Carolina law. North Carolina recognizes a standard called “privity of contract;” it essentially means that without a direct contract with the property owner, a subcontractor’s lien rights are inherently limited; the homeowner doesn’t have a contractor with the subcontractor and therefore would owe them nothing unless a right is granted by statute.
North Carolina law provides two methods for subcontractors to asset lien rights: 1) through a notice of claim of lien on funds, discussed previously in this blog here and a little bit here; and 2) through a process called subrogation, where a subcontractor asserts the rights of the contractor against the property owner.
North Carolina currently eliminates that subcontractor’s second right, that of subrogation, if a lien waiver is signed by the general contractor. This is a big problem for those who have been in a situation where the general contractor must sign a lien waiver in order to receive disbursement payments on a construction loan from a bank, lender, homeowner, or commercial lot owner. Far too often, subcontractors rights are being waived by general contractors who want to get paid themselves. As of April 1, 2013, that right will be eliminated and, provided that certain procedures are followed, the subcontractor will maintain those rights.
North Carolina construction law is very statute heavy, any contractor or subcontractor should have a relationship with a construction attorney who can guide them through the complicated procedures associated with enforcing lien rights. Maginnis Law, PLLC is a Raleigh civil litigation firm with construction lawyers handling matters in Cary, Apex, Wake Forest, and the rest of Wake County, Durham County, Johnston County, Granville County, Chatham County and the rest of the Triangle area. Contact the firm at 919.526.0450 to schedule a consultation regarding your rights or submit a new case inquiry here.