Claim of Lien on Funds: A Potential Saving Grace for “Slow to file” Lien Claimants
As an initial matter, it is worth pointing out that a sub-contractor’s best bet for getting paid is to timely file a mechanic’s lien within 120 days of the last day of furnishing labor or materials. However, sometimes, things happen. This has been particularly true recently with COVID-19 related shutdowns, delays, and closures. If you are a sub-contractor who needs to be paid, but you find yourself outside of the 120-day mechanic’s lien filing window, you have another lien option: a claim of lien on funds.
A claim of lien on funds is a way for a sub-contractor to possibly get its hands on funds owed to either a higher tier sub-contractor or the general contractor with whom the sub-contractor contracted. The North Carolina General Statutes provide a form for a claim of lien on funds, which is codified at N.C. Gen. Stat. § 44A-19.
Pursuant to statute, a notice of claim of lien on funds is generally not to be “…filed with the clerk of superior court, and shall not be indexed, docketed, or recorded in any way as to affect title to any real property…” This is because a claim of lien on funds does not deal with the improved real estate. Instead, it deals with money that is to flow to the general contractor, and down further through sub-contractors. The statute does allow a claim of lien on funds to be filed with the clerk of superior court when it is attached to a claim of lien on real property filed pursuant to N.C. Gen. Stat. § 44A-20(d).
While the “no time limit” benefit of a claim of lien on funds can be a saving grace for sub-contractors, it is important to file a claim of lien on funds as soon as possible. Simply put, if all the funds have already been paid to the general contractor, or a higher tier subcontractor, a claim of lien on funds will not be an effective way to secure payment. However, if funds remain to be paid to a general contractor or a higher tier sub-contractor, a claim of lien on funds is a fantastic way to ensure payment when a sub-contractor otherwise finds themselves outside of the normal 120 day filing window for a mechanic’s lien.
Of course, even if a sub-contractor’s mechanic’s lien rights have expired, or if a claim of lien on funds is not a viable option due to timing, a sub-contractor may still pursue payment through the ordinary legal theories of breach of contract and/or unjust enrichment. These claims have much longer statutes of limitation (three years each). The bottom line is, if you are a sub-contractor who has not been paid, you likely have legal rights that an experienced construction litigation attorney can help you navigate. If you would like to explore filing a mechanics lien, lien on funds, or even a lawsuit to ensure you get paid, the lawyers at Vann Attorneys would be glad to speak with you about doing so.