With the explosion of development throughout the Carolinas, contractors and subcontractors alike are all faced with the age-old problem of securing payment for their work. Often, payment for work can be held up by insurance companies or financial institutions. It’s important for contractors throughout the Carolinas to understand the nuances of mechanics’ liens and the key dates to secure their right to payment.
Mechanics Liens in the Carolinas are governed by statute and are strictly enforced. In North Carolina, Mechanics Liens are codified under Chapter 44A of the North Carolina General Statutes. Chapter 44A provides a number of key definitions to understand in order to secure your lien rights. Namely, in order to have lien rights under Chapter 44A, a person must improve property. The term “improve” is broadly defined as:
To build, effect, alter, repair, or demolish any improvement upon, connected with, or on or beneath the surface of any real property, or to excavate, clear, grade, fill or landscape any real property, or to construct driveways and private roadways, or to furnish materials, including trees and shrubbery, for any of such purposes, or to perform any labor upon such improvements, and shall also mean and include any design or other professional or skilled services furnished by architects, engineers, land surveyors and landscape architects registered under Chapter 83A, 89A or 89C of the General Statutes, and rental of equipment directly utilized on the real property in making the improvement.
N.C. Gen. Stat. Ann. § 44A-7 (2024). This broad definition allows for a number of contractors of varying involvement in a project to assert lien rights to secure payment.
South Carolina’s lien statutes have similar language to include a variety of work performed on real property. Specifically, S.C. Code Ann. § 29-5-10 provides lien rights to, “[a] person to whom a debt is due for labor performed or furnished or for materials furnished and actually used in the erection, alteration, or repair of a building or structure upon real estate or the boring and equipping of wells…” S.C. Code Ann. § 29-5-10 (2024).
Once you have determined that your work on a project qualifies under the relevant statute, it is important to understand the relevant deadlines for asserting lien rights to avoid certain pitfalls in collection and potential counterclaims for frivolous lien filings.
In North Carolina, the deadline to file a Notice of Claim of Lien on real property to secure payment is 120 days after the “last furnishing of labor or materials at the site of the improvement by the person claiming the lien.” N.C. Gen. Stat. § 44A-12 (2024). By contrast, in South Carolina the deadline to serve Notice of the Claim of Lien on the owner of the real property is only 90 days. S.C. Code. Ann. § 29-5-90 (2024). Both North Carolina and South Carolina require that a lawsuit to enforce the Claim of Lien be filed within 180 days (N.C. Gen. Stat. § 44A-13) or six months (S.C. Code Ann. § 29-5-120) from the last furnishing of labor.
It is critical to strictly follow the statutory deadlines for securing lien rights. A failure to strictly comply with the statutory deadlines could not only mean that a contractor loses out on security for payment, but a contractor could face civil penalties or counterclaims if an improper lien is filed. For example, in South Carolina, a frivolous lien filing could result in a penalty of up to $5,000.00 and/or a loss of license for the contractor. S.C. Code Ann. § 29-5-15 (2024).
While every contractor’s circumstances are unique, it is important for all contractors throughout the Carolinas to familiarize themselves with the relevant Mechanics Lien statutes to ensure that they are protecting themselves.