Thoughts on construction law from Christopher G. Hill, Virginia construction lawyer, LEED AP, mediator, and member of the Virginia Legal Elite in Construction Law

Simplifying North Carolina’s Mechanic’s Lien Agent Process: NC’s New Online Clearinghouse

bryan-scott-web1For this week’s Guest Post Friday at Construction Law Musings, we welcome back Bryan G. Scott. Bryan (@winstonattorney) is an attorney at Spilman Thomas & Battle, PLC and co-Chair of the firm’s Construction Practice Group

Thank you to Chris for the opportunity once again to guest post here at Construction Law Musings. As I discussed in my last post, North Carolina’s General Assembly last year introduced the concept of Mechanic’s Lien Agent (MLA) into our state’s lien laws as a way of addressing “hidden liens” that have long been a thorn in the side of title insurers. Beginning this Monday, April 1, 2013, project owners in North Carolina are required to designate an MLA for the vast majority of construction projects, and contractors or other potential lien claimants must identify themselves through written notice to the MLA if they want to ensure their lien priority against lenders or purchasers.

The requirement for designating an MLA applies to all private construction projects—residential or commercial—where the total cost of the improvements is $30,000 or more (but excluding improvements to existing family residences). The owner (or contractor on its behalf) must designate the MLA at the time of contracting and then post the MLA’s information at the project, typically on the building permit itself. With few exceptions, potential lien claimants must then provide notice to the MLA within 15 days after first furnishing labor or materials to the project to preserve their lien priority in the event the owner conveys any interest in the property.

The new MLA requirements will significantly benefit title insurers, who lobbied hard for their adoption. Many contractors and even some owners, however, have expressed significant concern over the increased administrative burden required by the new scheme. In a bid to allay these concerns, the title industry has developed a handy new website to simplify the MLA process for owners and contractors alike.

The new NC Online Lien Agent System at www.liensnc.com is intended “to make the filing of MLA notices as simple and fast as possible for all users.” The online LiensNC liensncapplication has been under construction for the past several months, but goes live on April 1. In anticipation of the launch, the website currently features a very useful overview video (available for download as a powerpoint) and a topical guide for more information and detailed filing instructions.

The online application provides a remarkably simple method for owners to appoint an MLA from a dropdown menu listing the title companies and agencies registered with the Department of Insurance. When an owner (or contractor on the owner’s behalf) appoints an MLA online, the LiensNC system also generates an Appointment of Lien Agent document containing all the pertinent information for the MLA, which can then be attached to the building permit as required by the statute.

The LiensNC application also contains useful features for potential lien claimants to quickly locate a project, provide notice of their involvement to the MLA, and give notice of a claim of lien on funds. After filing, the system delivers a receipt to the potential lien claimant for its records. All filed notices are easily searchable through the application and provide a quick index to activity on the project for interested parties like lenders or title insurers.

Fees for using the LiensNC application are modest. It costs $25 to file an Appointment of Lien Agent on one to two family dwellings and $50 for all other projects. There is no fee for potential lien claimants to file a Notice to Lien Agent or Notice of Claim of Lien on Funds.

Another particularly useful feature of the application is its use of unique Quick Response (QR) codes—special square bar codes that can be read by a mobile smartphone’s camera—for each registered project. All LiensNC filings will contain these QR codes, which link back to the details of the filing and construction project. When the QR code is posted at the project site, potential lien claimants can scan the QR code with their iPhone, Android phone, or other similar smartphone device to easily file a Notice to Lien Agent with the key information pre-populated into the form. Although the potential lien claimant is always free to manually complete its own forms, the QR code should significantly streamline the process as contractors and subcontractors adjust to the new technology.The new lien laws don’t mandate use of the online LiensNC application. Nevertheless, most construction participants expect the website to become the preferred clearinghouse for MLA information and notices in North Carolina. Local permitting offices will surely appreciate receiving a standardized Appointment of Lien Agent form with building permit applications. Closing attorneys, lenders, and title insurers will find the search functions incredibly useful in researching potential lien claimants at or before property closings. And owners and contractors should appreciate the user friendly interface and simplified procedure for filing the various MLA-related notices now required by law. The application is still a work in progress, but so far it seems to have something for everyone.

It will be very interesting to see how the web application is accepted by the construction industry over time. My guess is that most of us will include it among our Internet favorites in short order. Take the time now to familiarize yourself with the LiensNC website and the new MLA requirements. As always, consult an experienced construction attorney with questions about specific requirements of the new North Carolina lien laws.

As always, Bryan and I welcome your comments below. Please subscribe to keep up with this and other Guest Post Fridays at Construction Law Musings.

Simplifying North Carolina’s Mechanic’s Lien Agent Process: NC's New Online Clearinghouse
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