Construction projects in North Carolina involve multiple layers of contractors, subcontractors, and suppliers. When payment disputes arise, mechanic’s liens—known in North Carolina as claims of lien on real property—are among the most powerful legal remedies available to those who furnish labor or materials. While liens can protect contractors and suppliers, they also create significant challenges for property owners and general contractors. Below is an overview of how a claim of lien can affect your project, your property, and your bottom line.

What Is a Claim of Lien in North Carolina?

Under N.C. Gen. Stat. § 44A, a claim of lien is a statutory right that allows parties who improve real property to secure payment by placing a lien against the property itself. This right applies whether you are a general contractor, subcontractor, or material supplier.

In North Carolina, there are two primary types of lien filings:

• Claim of Lien on Real Property (filed by those in direct contractual privity with the property owner, typically general contractors)
• Claim of Lien Upon Funds (filed by subcontractors and suppliers to attach funds owed by the owner to the general contractor)

Liens must be perfected properly and within strict deadlines—generally within 120 days of the claimant’s last furnishing of labor or materials. A lawsuit to enforce the lien must be filed within 180 days of last furnishing.

How a Claim of Lien Affects Property Owners

1. Cloud on Title
   • Once filed with the Clerk of Superior Court, the lien attaches to the property’s title, making it difficult to sell, refinance, or transfer the property until the lien is resolved or discharged.
2. Interruption of Project Funding
   • Most lenders require lien-free title before releasing draws. A filed lien can freeze construction financing or delay progress payments.
3. Risk of Foreclosure
   • North Carolina law allows lien claimants to foreclose through a civil action. If successful, the property can be sold at auction to pay the debt.
4. Increased Costs and Delays
   • Owners may need to obtain lien release bonds, negotiate settlements, or pay legal fees to remove the lien and protect their investment.
5. Reputational Impact
   • A lien filing can damage relationships with contractors and signal potential credit or payment issues to future lenders and project partners.

How a Claim of Lien Affects General Contractors

1. Responsibility for Downstream Payments
   • Even if the owner has paid the general contractor, unpaid subcontractors or suppliers can file a lien upon funds and potentially a lien on real property if proper notice was given (through a Notice to Lien Agent or similar mechanisms).
2. Bonding and Financial Strain
   • General contractors often must obtain a lien discharge bond to clear title and keep the project moving. This ties up credit capacity and incurs additional costs.
3. Potential Litigation
   • Resolving liens frequently requires negotiation or litigation. General contractors may be forced to defend or indemnify against subcontractor claims.
4. Harm to Business Reputation
   • Multiple lien filings on projects can harm a contractor’s reputation with owners, bonding companies, and lenders.

Best Practices to Avoid or Manage Liens in North Carolina

• Post a Notice of Lien Agent
  • North Carolina law requires most owners to designate a lien agent and post notice. Subcontractors and suppliers must serve a Notice to Lien Agent to preserve lien rights.
• Use Conditional and Unconditional Lien Waivers
  • Collect signed lien waivers with each payment to help protect against double payment and surprise claims.
• Maintain Clear Records
  • Keep meticulous records of contracts, change orders, payment applications, and correspondence to support your position if a lien is filed.
• Communicate Early
  • Payment disputes often escalate when communication breaks down. Address payment issues as soon as they arise.
• Act Promptly on Lien Filings
  • Never ignore a lien claim. Consult an attorney immediately to assess the validity and determine the best resolution strategy within the statutory deadlines.

At Vann Attorneys, PLLC, we understand that lien disputes can disrupt construction projects and create serious legal and financial risk. Our experience North Carolina construction law attorneys can:

• Review and assess the validity of lien claims
• Help you negotiate settlements or payment plans
• Prepare and file lien releases or lien discharge bonds
• Defend or enforce lien claims in court
• Advise on best practices to prevent liens in the future

Whether you are a property owner, developer, general contractor, or subcontractor, we are here to help you protect your investment and keep your project moving forward.