Know Who You Are Working With: Ownership Interest and Lien Rights in North Carolina
As we all know, it is important to know who you are contracting and working with in the business context. Especially when there is a business entity involved. Do you know the actual and correct business name? In the construction trade, if the company says they are owner of real estate, does that matter for lien rights?
The North Carolina Court of Appeals found in Davis & Taft vs. DDR (2019) that the design firm which provided design services for a prospective property purchaser could not property assert a claim of lien on the real property given that the services were not used to improve the real property.
North Carolina lien law defines the owner of real property as a “person who has an interest in the real property improved and for whom as improvement is made and how ordered the improvement to be made.” In this case, the Court made mention that the terms “labor” and “improve” contemplate actual work being performed on the real property in question by the person claiming the lien.
In this case, the design firm contracted with a prospective buyer of the real property and not the owner of the real property. Also, the work provided by the design firm was not used to improve the real property as outlined by the North Carolina General Statutes.
In the case, the design firm did not win on their lien claim but the contract claim should prevail. Thus, the customer (DDR) is still under an obligation to pay the design firm for the work provided as long as they had a contract to do the work.
The take-away from this case is to know who you are contracting with and where they fall in relationship to the ownership of the real property.