QUICK REFERENCE GUIDES | NCBA Young Lawyers Division
Claims of Lien Step-by-Step Guide
Authored by Sarah Blount
Partner at Jordan & Blount, PLLC | scb@jordanblountlaw.com
INTRODUCTION
Claims of Lien on Real Property, or “Mechanic’s Liens,”
are one of the oldest and most valuable tools for recovery
of money owed to construction industry players and are
encountered by lawyers in a variety of situations. However,
the requirements to take advantage of this special statutory
right are technical and specic and must occur within a
very narrow window of time after the work is performed so
strict compliance with the requirements of Chapter 44A is
essential. This Guide addresses the processes and procedures
for ling, enforcing, perfecting, and discharging a mechanic’s
lien on real property and on contract funds in North Carolina.
What is a Mechanic’s Lien?
A mechanic’s or materialman’s lien is a powerful statutory right
codied in Article 2 of Chapter 44A of the North Carolina
General Statutes which allows parties providing labor, services,
materials, or equipment used for improvement to real property
to hold that real property and/or contract funds for that property
as security for payment of their completed work.
Dening “improvement” to real property: To build, alter,
repair, or demolish any improvement upon, connected with,
or beneath the surface, or to excavate, grade, ll, or landscape
any property, or to construct driveways and private roadways,
or to furnish materials for such purposes (including plants and
shrubs), or to perform labor, including providing design or
other professional or skilled services furnished by architects,
engineers, land surveyors etc., and the rental of equipment
directly used on the property in making the improvement.
(N.C.G.S. § 44A-7(3))
Important Terms
Obligor: An owner, contractor or subcontractor (in any
tier) who owes money to another party for the work, labor,
materials, or equipment they provided in performance of a
contract to improve real property.
Contractor: General term for an individual or business who
contracts to improve real property.
General Contractor: Individual or business who contracts
directly with the Owner of the real property to perform
construction services or provide labor/materials to the project.
Subcontractor: Individual or business who contracts directly
with the general contractor or another subcontractor on the
project to perform construction services or provide labor/
materials to the project to complete the land improvement
project for which the general contractor was hired by the
property owner.
First Furnishing: date on which the contractor rst performed
services or provided labor, materials, or equipment to the
property.
Last Furnishing: date on which the contractor last performed
services or provided labor, materials, or equipment to the
property.
Subrogation: “Stepping into the shoes” of another party to
assert that party’s rights.
Lien Agent: authorized title insurance company that receives
and tracks notices from contractors and subcontractors of
potential claims of liens.
Applicable Statutes
N.C. Gen. Stat. § 44A-10 – A Claim of Lien on Property is
effective from the date the contractor rst furnished labor,
materials or equipment to the property.
N.C. Gen. Stat. § 44A-11 – Perfecting a Claim of Lien on
Property: ling and service.
N.C. Gen. Stat. § 44A-12(b) – 120-day timeframe for ling
Claim of Lien on Real Property from date of Last Furnishing.
N.C. Gen. Stat. § 44A-12(c) – Statutory form of Claim of Lien
on Property.
N.C. Gen. Stat. § 44A-12(d) – A Claim of Lien on Property
may not be amended; it must be cancelled, and a new lien
substituted within 120-day ling timeframe.
N.C. Gen. Stat. § 44A-13 – Lawsuit to enforce Claim of Lien
on Property; required to be brought within 180 days of last
furnishing.
N.C. Gen. Stat. § 44A-18 – Claims of Lien on Funds available
to subcontractors.
N.C. Gen. Stat. § 44A-18(d) – Subrogation rights do not extend
to subcontractors and suppliers more remote than third-tier.
N.C. Gen. Stat. § 44A-19 – Statutory form of Claim of Lien
on Funds.
N.C. Gen. Stat. § 44A-35 – Attorneys’ fees available for
prevailing party at discretion of court when there is an
unreasonable refusal by losing party to resolve the matter.
I. PRELIMINARY QUESTIONS:
Was the construction project private or public?
A contractor on a private project is entitled to a
Mechanic’s lien against the property under Chapter 44A.
Conversely, as public property is owned by the people
of the public, public construction projects cannot be
liened or foreclosed. When construction related work
is contracted to be performed on government-owned
property (such as for the construction of a school, work
on a stormwater management system, or building a new
road) there will most often be a surety “payment” bond
covering the project. A Contractor who has not been paid
for its work on a public project can assert a claim against
the payment bond for payment of amounts owed.
Who is your client?
In NC there are two types of mechanic’s liens, Liens
on Real Property for parties contracting directly with
the Owner (See N.C.G.S. § 44A-7 – 44A-16); and Liens
on Funds for parties contracting with a party other than
the Owner, such as a Subcontractor or Supplier (See
N.C.G.S. § 44A-18 — 44A-23)
A subcontractor may also claim a Lien on Property in
addition to the Lien on Funds in certain circumstances
via subrogation, or also in instances when the Owner
made improper payments to its Contractor in violation
of a valid Lien on Funds after receiving notice. If your
client is a subcontractor or supplier, its lien on property
claim will be asserted via “subrogation” by “stepping
into the shoes” of the higher-tier contractor to assert
the rights that contractor has against the Owner for any
amounts due. This means that whenever an owner has
already paid the general contractor, a subcontractor
will not have lien rights.
When did your client perform the work?
While Claims of Liens on Property are a powerful
statutory tool for collecting payment, they accordingly
have some substantial limitations and procedural
requirements. Perhaps the most common invalidating
factor is conformity with the 120-day ling period.
N.C.G.S. § 44A-12(b) requires that all claims of lien
must be led “not later than 120 days after the last
furnishing of labor or materials at the site…” This short
time-ling deadline often sneaks up on many clients
as 120 days is very brief considering the time between
when the work is performed and when a potential lien
claimant realizes there is a real problem getting paid.
Claims of Lien on Funds of subcontractors do not have
the same 120-ling deadlines. Rather, a Lien on Funds
is limited to the statute of limitations and statute of
repose on the underlying breach of contract claim. A
lien claimant may also extend the deadline for ling an
action to enforce a Lien by tolling agreement (Charlotte
Motor Speedway, Inc. v. Tindall Corp., 672 S.E.2d 691,
694 (N.C. Ct. App. 2009.)
What Pre-Lien Notices were posted for the project?
a. Lien Agent
For any contract for construction work over $30,000
and which is not for the improvement of, or an
addition of an accessory building or structure to, a
single-family, Owner-occupied residence, a “Lien
Agent” must be appointed by the Owner or its
representative. The Lien Agent is an authorized
title insurance company appointed to receive and
track notices from contractors and subcontractors
of potential claims of lien.Contractors and
Subcontractors are required to serve a Notice to Lien
Agent upon the Lien Agent designated on a project
within 15 days of rst furnishing labor, materials,
services or equipment. The NC Online Lien Agent
System website, www.liensnc.com, allows potential
lien claimants to easily le and serve notice on the
lien agent electronically. The Notice preserves the
right of a potential lien claimant to pursue a Claim
of Lien against the project property later. However,
failure to le and serve a Notice to Lien Agent will
only preclude a lien claim if the property is sold,
renanced, or otherwise transferred prior to Notice
being given. The Notice to Lien Agent does not get
led with the Clerk of Superior Court.
b. Notice of Contract / Notice of Subcontract
An Owner or Contractor is also required to le with
the Clerk of Court and post at the project property
a Notice of Contract within 30 days of the later
of: (i) the date a building permit is issued for the
improvement; or (ii) the date the Contractor is
a.
c.
d.
b.
awarded the contract for the project. If a second- or
third-tier subcontractor does not protect its right by
also serving a signed Notice of Subcontract pursuant
to N.C.G.S. § 44A-23(b), the potential lien claimant’s
lien rights may be extinguished.
II. THE CLAIM OF LIEN ON REAL PROPERTY
Because Claims of Liens on Property cannot be amended
pursuant to N.C.G.S. § 44A-12(d), it is important to get the
led Claim of Lien right the rst time. If a Claim of Lien is
defective, the only option is to cancel the Claim of Lien and
le a new corrected lien to substitute within the 120-day
ling period.
When: A claim of lien on property must be led within
120 days of a contractor’s last date of Last Furnishing.
Claims of Liens on Property must also be served on the
Owner and any other parties up the contractual chain
within this 120-day timeframe. To evidence service of
the Lien, a copy may be sent via a method with delivery
receipt such as certied mail or UPS adult signature
service, or sworn language may be included by the
attorney in the body of the Claim of Lien generally
certifying that the Lien Claimant or its agent have served
the Owner (and contractor through which subrogation
is asserted if the client is a subcontractor) in accordance
with the requirements of G.S. 44A-11.
Where: A Claim of Lien on Real Property must be led
in the county where the property is located.
What: Mechanic’s liens cover all claims arising from
contracts to improve real property. The amount of the
lien claim is limited to the unpaid amount remaining
due on the project contract. The form of a Claim of
Lien on Property is statutorily prescribed in N.C.G.S. §
44A-12(c) and requires the following:
Lien Claimant’s (your client) Name and Address;
Property Owner’s Name and Address;
Property Description – Can be street address, tax
lot & block number, reference to the recorded
underlying deed or other recorded instrument,
parcel identication number, or other description
that reasonably identies the property (N.C.G.S. §
44A-12(c)(3));
Date Lien Claimant FIRST provided labor or
materials to the property;
Date Lien Claimant LAST provided labor or
materials to the property. This date establishes the
lien priority date back to the date of rst furnishing
of labor or materials (rather than the date of ling);
General description of the work or materials
furnished to the property;
Amounts owed for the work performed. N.C.G.S. §
44A-35 allows for attorneys’ fees, but the amount
should not be included in the Lien; and
Dated and signed by either the lien claimant or its
agent, or the lien claimant’s attorney. A Claim of
Lien does not need to be notarized.
If your client is a subcontractor asserting a subrogation
claim of lien on property, the following information is also
required:
Name and address of each party through which
subrogation rights are claimed;
Name and address of the person with whom the
lien claimant contracted if different than above;
Attach a copy of the notice of Claim of Lien on
Funds as an exhibit; and
Although not required, a lien claimant should
also consider including the following introductory
language:
“PLEASE TAKE NOTICE that the undersigned
lien claimant claims a lien on funds owed to the
contractor and to each subcontractor against or
through whom this claim is made. On receipt of
this lien on funds you may not make any further
payments to any of these parties unless you retain
from such payments an amount sufcient to
satisfy the lien on funds claimed herein. Failure
to withhold sums as required may result in direct
liability to the lien claimant.”
III. THE CLAIM OF LIEN ON FUNDS
N.C.G.S. § 44A-18 provides subcontractors and suppliers
down to the third tier the right to assert a Claim of Lien on Funds
via subrogation. The Lien on Funds attaches to any funds that
the Obligor owes to the contractor whom the lien claimant
contracted with. For example, a rst-tier subcontractor has a
direct lien on the funds for amounts it is owed to the extent
and amount that the project Owner owes to the General
Contractor. Similarly, a second-tier subcontractor has a
direct lien on the funds that a General Contractor owes to
the rst-tier subcontractor (who contracted with your client).
Second and third tier subcontractors are subrogated to the
rights of the lien claimant above them in the contract chain.
For example, the amount of a second-tier subcontractor’s
lien on funds would be limited to the amount of the rst-tier
subcontractor’s direct lien on the funds owed by the Owner
to the general contractor. This means that if your client is a
second-tier subcontractor owed $50,000 by the rst-tier
subcontractor, but the rst-tier subcontractor is only still
owed $30,000 by the general contractor, your client’s Lien
will be limited to $30,000.
A Claim of Lien on Funds attaches and is effective immediately
upon the rst furnishing of labor, materials, or equipment to the
project site. The Lien is perfected by serving a Notice of Claim
a.
ix.
x.
xi.
xii.
i.
ii.
iii.
b.
c.
iv.
v.
vi.
vii.
viii.
of Lien on Funds upon all potential obligors by certied mail
or any other manner specied by Rule 4 of the NC Rules of
Civil Procedure, including the property owner, the contractor,
and each tier of subcontractors between the contractor and
the lien claimant as set out in N.C.G.S. § 44A-19(d). Claims
of Liens on Funds are not required to be led. However, they
are included as an exhibit to any corresponding subrogated
Claim of Lien on Property which may be led. Unlike a Claim
of Lien on Property, there is no deadline for serving a Notice
of Claim of Lien on Funds. However, the best practice is to
serve the Notice as soon as possible to increase the likelihood
of capturing any potential funds held by the Obligor or owed
by the Obligor on the project contract.
Upon receiving a Notice of Claim of Lien on Funds, an
Obligor is required to retain all funds subject to the Lien
on Funds up to the full amount of the lien claim and stop
making further payments of such amounts to contractors or
subcontractors which are in tiers above the lien claimant
unless it has retained an amount sufcient to satisfy the lien
on funds claimed. An Obligor that “pays over” a Lien on
Funds after receipt of notice is personally liable to the lien
claimant for the amount of the lien pursuant to N.C.G.S. §
44A-20(d).
IV. THE LIEN FORECLOSURE LAWSUIT
Oftentimes, the cloud on title created by a Claim of Lien
on Property will be enough to prompt payment from an
Owner or potentially the general contractor for subcontractor
claimants. If, however, payment of the claimed amount has
not been secured within 180 days of last furnishing, a civil
action to enforce and foreclose the Claim of Lien on Property
must be led in District or Superior Court depending on the
amount of the claim pursuant to N.C.G.S. § 44A-13.
A lawsuit to enforce and foreclose a Claim of Lien on Property
follows the same form and process as any other civil suit
but includes as a prayer for relief that the property be sold,
and the proceeds applied to the lien claim amount. The suit
should also include any additional or alternative claims for
the work performed or materials provided, including, but not
limited to, enforcement of the Claim of Lien on Funds for
subcontractors, breach of contract, unjust enrichment, and
quantum meriut.
If the 180-day time period is missed for the lien lawsuit, the
contractor still can le a breach of contract claim under the
normal three (3) year statute of limitations.
V. PRIORITY OF LIENS
A perfected Claim of Lien on Property has the special privilege
of a “relate-back” date of the date of rst furnishing of work,
materials or equipment to the project, over all other interests
(N.C.G.S. § 44A-10).
A perfected Claim of Lien on Funds has “super-priority”
over all other interests or claims against the funds, including
liens arising from garnishment, attachment, levy, judgment,
security interests (N.C.G.S. § 44A-22).
In the event insufcient funds are available to satisfy all lien
claimants, subcontractor lien claimants who have asserted
Liens on Funds may recover amounts due under this section
on a pro-rata basis.
VI. DISCHARGING A LIEN
A Lien can be discharged by several methods as set out in
N.C.G.S. § 44A-20(e), including:
• Acknowledging payment of the debt in person at the
Clerk’s ofce by signing an acknowledgement in front of
the Clerk, which is then led;
• Filing a Notice of Satisfaction of Lien (if satised);
• Filing a Cancellation of Lien (if unsatised);
• Depositing cash in the amount of the lien claim with the
Clerk of Superior Court (a “Cash Bond”);
• Depositing a corporate surety bond with the Clerk of
Superior Court in an amount equal to 125% of the lien
claim (a “Surety” bond); or
• Filing a certied copy of a judgment or decree in the lien
enforcement action showing the action was dismissed or
otherwise determined adversely to the Lien Claimant.
NCBA YLD Quick Reference Guide | Updated 2021
Additional Resource:
NC Construction Law Deskbook 8th Edition (2021)
This newly released edition is now FREE as a
member benet for all members of the Construction
Law section of the NCBA and is available in an
entirely electronic, easily searchable format.
The Construction Law Deskbook has been a
preeminent resource for practitioners serving the
NC construction industry for over 25 years and
includes:
• Discussion and practice pointers on frequently
occurring issues
• Relevant case law and new developments
• Pertinent forms and examples
