General contractors and subcontractors have various rights available to ensure payment for work performed.  Effectively, liens and bonds are the two main avenues for non-payment, depending on the type of construction project.  Also, when bidding on public projects, both payment and performance bonds are often required for the bidding contractor as well.  Knowing the basics of both, particularly the relevant deadlines, is a must for your construction company.    

Mechanics Liens

In North Carolina, mechanics liens are governed by N.C. Gen. Stat. § 44A-7 et seq. The statutes protect general contractors, as well as subcontractors and second-tier subcontractors. Generally, liens must be filed no later than 120 days after the last date materials or labor were furnished. Additionally, an action to enforce a lien must be commenced within 180 days after the last date materials or labor were furnished.

Virginia requires a contractor to file their mechanic’s lien within 90 days after the last day of the month in which labor or services were provided to the owner.  Additionally, contractors may only capture sums due for labor or services furnished within 150 days before the filing of the lien.

As in Virginia, liens in South Carolina must be filed within 90 days of the last day on which labor or services were provided to the owner. Lawsuits to enforce liens must be brought within six months of the last day upon which labor or services were provided to the owner, or the lien itself will be dissolved.

Payment and Performance Bonds

Contractors may also have rights related to payment bonds, particularly for public construction projects. Additionally, owners have remedies for default based on performance bonds that contractors may be required to post. 

Payment bonds in North Carolina are governed by N.C. Gen. Stat. § 44A-25 through N.C. Gen. Stat. § 44A-35. Generally, in North Carolina, when the total amount of public construction contracts awarded exceeds $300,000, contractors who are awarded a contract in excess of $50,000 are required to post a performance and payment bond equal to the sum of the awarded contract.  Contractors who are not in a direct contractual relationship with the contractor who posted the payment bond for the project must file a claim upon such payment bond within 120 days after the last day labor or materials were provided to the project.

In Virginia, performance and payment bonds are required for any contractor who is awarded a public contract in excess of $500,000 or $350,000 for transportation-related projects. Lower-tier contractors who have a direct contractual relationship with the contractor who has posted the payment bond may bring suit to claim their portion of the payment bond 90 days after the day labor and materials were last provided, but must file suit within a year after the day labor and materials were last provided. Contractors who are not in a direct contractual relationship with the contractor who posted the payment bond for the project must file a claim upon such payment bond within 90 days from the last day labor or materials were provided to the project.

In South Carolina, any contractor awarded a public contract in excess of $50,000 must also provide a payment bond in the full amount of the contract. Subcontractors are expressly given the right to payment from parties with whom they contract, regardless of whether payment by the owner to the general contractor has been made. Lower-tier contractors must wait to bring suit on payment bonds for 90 days after the last day in which labor or services were provided, but they must also file suit for nonpayment within one year of the date labor or materials were last provided.

Conclusion

If you are a contractor or subcontractor, you need to be aware of the statutory remedies available to you in the event of nonpayment. Likewise, when bidding on public jobs or estimating projects, contractors should be aware of their bonding requirements, both for payment and performance bonds as this can impact the cost of the bid and risks to the contractor.