The Status Of Lien Law

In North Carolina

2009

THREE STRIKES THREE STRIKES AND AND

YOU MAY BE OUTYOU MAY BE OUT

SHORT LIEN LAW REVIEW

• 44A-12: Claim of Lien on Real Property (contract with owner)

• 44A-18 & 19: Notice of Claim of Lien upon Funds (Subcontractor)

• 44A-23: Subrogated Claim of Lien on Real Property (Subcontractor)

LIEN ON REAL PROPERTY AND RELATION BACK

Once a Claim of Lien on Real Property is filed with the Clerk, it relates back to and is effective as of the date of first furnishing.

Why does this matter?

2009 – AN EVENTFUL YEAR IN LIEN LAW

• Legislature got in the act (almost)

• Bankruptcy Court (Eastern District) also got in the act (totally)

FIRST SWING OF THE BAT – TITLE INSURERS

• SB 803 Proposed at behest of the Title Insurance Industry

• Aimed at ending relating back if a new purchaser closes a sale before a lien is filed (the infamous “hidden lien”)

LEGISLATIVE STATUS

• Did not get out of Senate Committee (this year)

• Is subject of a “Funded Study Commission”

• Lobbying to come

STUDY COMMISSION MAKE-UP

1. Four Members of the Senate and three members of the public appointed by the President Pro Tempore of the Senate.

2. Four members of the House of Representatives and three members of the public appointed by the Speaker of the House of Representatives.

3. The members of the public shall be as follows:a) A representative of a title insurance company;

b) A practicing real estate attorney;

c) A representative of a bank;

d) A material supplier or subcontractor or representative of a material supplier or subcontractor;

e) A residential home builder or a representative of a residential home builder, and;

f) A commercial contractor or representative of a commercial contractor.

STRIKE TWO

• Shearin, Harrelson Utilities, Mammoth Grading Decisions

• Chaos in the Eastern District

• Does it matter in the Middle and Western Districts?

• And what are the “Districts anyway”?

CRUX OF THE DECISIONS

• Neither Notices of Claims of Lien upon Funds nor Subrogated Liens on Real Property may be filed after a bankruptcy petition has been filed

MORAL OF THE STORY

• Serve your Lien on Funds at the first sign of trouble (or as early as you dare) or risk having your lien rights severed

CURRENT STATUS OF THE APPEAL

• A number of subcontractors and suppliers with sizeable dollar amounts at issue have filed notices of appeal in Harrelson Utilities and Mammoth Grading

• It is possible Amicus Curiae briefs will be filed as well

• Decision sometime in 2010

POSSIBLE OUTCOMES

• Legislative Remedy• Appellate Remedy• Further Appeal• Industry Changes

reacting to the court action

THE THIRD STRIKE?

No one knows right now, but the lien law seems to be under fire, so bet on another pitch.

May be the Bankruptcy Court in Mammoth addressing the Preference Issue

So, what is a “preference” and why might this matter?

Thank You!Thank You!

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Tel: 919-510-8585 | Fax: 919-510-8570Tel: 919-510-8585 | Fax: 919-510-8570

1200 East Morehead Street • Suite 251 • Charlotte, NC 28204 1200 East Morehead Street • Suite 251 • Charlotte, NC 28204

Phone: 704-496-7495 • Facsimile: 704-496-7480Phone: 704-496-7495 • Facsimile: 704-496-7480

www.vannattorneys.comwww.vannattorneys.com

1720 Hillsborough Street, Suite 200 | Raleigh, NC 276051720 Hillsborough Street, Suite 200 | Raleigh, NC 27605

Tel: 919-510-8585 | Fax: 919-510-8570Tel: 919-510-8585 | Fax: 919-510-8570

1200 East Morehead Street • Suite 251 • Charlotte, NC 28204 1200 East Morehead Street • Suite 251 • Charlotte, NC 28204

Phone: 704-496-7495 • Facsimile: 704-496-7480Phone: 704-496-7495 • Facsimile: 704-496-7480

www.vannattorneys.comwww.vannattorneys.com