NORTH CAROLINA GENERAL ASSEMBLY

1971 SESSION

 

 

CHAPTER 880

HOUSE BILL 393

 

 

AN ACT TO REWRITE THE LAW GOVERNING LIENS OF MECHANICS, MATERIALMEN, AND LABORERS WHO DEAL WITH ONE OTHER THAN THE OWNER.

 

The General Assembly of North Carolina enacts:

 

Section 1.  Article 2 of Chapter 44A of the General Statutes is hereby amended by adding at the end thereof a new Part 2, to read as follows:

 

"Part 2. Statutory Liens on Real Property.

Liens of Mechanics, Laborers and Materialmen Dealing with One Other Than Owner.

"§ 44A-17.  Definitions. — Unless the context otherwise requires in this Article:

(1)        'Contractor' means a person who contracts with an owner to improve real property.

(2)        'Obligor' means an owner, contractor or subcontractor in any tier who owes money to another as a result of the other's partial or total performance of a contract to improve real property.

(3)        'First tier subcontractor' means a person who contracts with a contractor to improve real property.

(4)        'Second tier subcontractor' means a person who contracts with a first tier subcontractor to improve real property.

(5)        'Third tier subcontractor' means a person who contracts with a second tier subcontractor to improve real property.

"§ 44A-18.  Grant of lien; subrogation; perfection. — Upon compliance with this Article:

(1)        A first tier subcontractor who furnished labor or materials at the site of the improvement shall be entitled to a lien upon funds which are owed to the contractor with whom the first tier subcontractor dealt and which arise out of the improvement on which the first tier subcontractor worked or furnished materials.

(2)        A second tier subcontractor who furnished labor or materials at the site of the improvement shall be entitled to a lien upon funds which are owed to the first tier subcontractor with whom the second tier subcontractor dealt and which arise out of the improvement on which the second tier subcontractor worked or furnished materials. A second tier subcontractor, to the extent of his lien provided in this subsection, shall also be entitled to be subrogated to the lien of the first tier subcontractor with whom he dealt provided for in subsection (1) and shall be entitled to perfect it by notice to the extent of his claim.

(3)        A third tier subcontractor who furnished labor or materials at the site of the improvement shall be entitled to a lien upon funds which are owed to the second tier subcontractor with whom the third tier subcontractor dealt and which arise out of the improvement on which the third tier subcontractor worked or furnished materials. A third tier subcontractor, to the extent of his lien provided in this subsection, shall also be entitled to be subrogated to the lien of the second tier subcontractor with whom he dealt and to the lien of the first tier subcontractor with whom the second tier subcontractor dealt to the extent that the second tier subcontractor is entitled to be subrogated thereto, and in either case shall be entitled to perfect the same by notice to the extent of his claim.

(4)        Subcontractors more remote than the third tier who furnished labor or material at the site of the improvement shall be entitled to a lien upon funds which are owed to the person with whom they dealt and which arise out of the improvement on which they furnished labor or material, but such remote tier subcontractor shall not be entitled to subrogation to the rights of other persons.

(5)        The liens granted under this section shall secure amounts earned by the lien claimant as a result of his having furnished labor or materials at the site of the improvement under the contract to improve real property, whether or not such amounts are due and whether or not performance or delivery is complete.

(6)        The liens granted under this section are perfected upon the giving of notice in writing to the obligor as hereinafter provided and shall be effective upon the receipt thereof by such obligor.

"§ 44A-19.  Notice to obligor. — (a) Notice of a claim of lien shall set forth:

(1)        the name and address of the person claiming the lien,

(2)        a general description of the real property improved,

(3)        the name and address of the person with whom the lien claimant contracted to improve real property,

(4)        the name and address of each person against or through whom subrogation rights are claimed,

(5)        a general description of the contract and the person against whose interest the lien is claimed, and

(6)        the amount claimed by the lien claimant under his contract.

(b)        All notices of claims of liens by first, second or third tier subcontractors must be given using a form substantially as follows:

 

NOTICE OF CLAIM OF LIEN BY

FIRST, SECOND OR THIRD TIER SUBCONTRACTOR

To:

1.__________________________, owner of property involved.

(Name and address)

2.__________________________, general contractor.

(Name and address)

3.__________________________, first tier subcontractor

(Name and address)                   against or through whom

                                                  subrogation is claimed, if

                                                  any.

4.__________________________, second tier subcontractor

(Name and address)                   against or through whom

                                                  subrogation is claimed, if

                                                  any.

General description of real property where labor performed or material furnished:

____________________________________________________________________________

________________________________________________________________________________________________________________________________________________________

General description of undersigned lien claimant's contract including the names of the parties thereto:______________________________________________________________________

 

The amount of lien claimed pursuant to the above described contract:

$ ____________________

The undersigned lien claimant gives this notice of claim of lien pursuant to North Carolina law and claims all rights of subrogation to which he is entitled under Part 2 of Article 2 of Chapter 44A of the General Statutes of North Carolina.

Dated______________________________,

______________________________Lien Claimant

_________________________________________

(Address)

(c)        All notices of claims of liens by subcontractors more remote than the third tier must be given using a form substantially as follows:

NOTICE OF CLAIM OF LIEN BY SUBCONTRACTOR

MORE REMOTE THAN THE THIRD TIER

To:

__________________________________, person holding funds against which lien is claimed.

(Name and Address)

General description of real property where labor performed or material furnished:

____________________________________________________________________________

____________________________________________________________________________

General description of undersigned lien claimant's contract including the names of the parties thereto:______________________________________________________________________

____________________________________________________________________________

The amount of lien claimed pursuant to the above described contract:

$_______________________

The undersigned lien claimant gives this notice of claim of lien pursuant to North Carolina law and claims all rights to which he is entitled under Part 2 of Article 2 of Chapter 44A of the General Statutes of North Carolina.

Dated:____________________________ ______________________________, Lien Claimant

(Address)

 

"§ 44A-20.  Duties and liability of obligor. (a) Upon receipt of the notice provided for in this Article the obligor shall be under a duty to retain any funds subject to the lien or liens under this Article up to the total amount of such liens as to which notice has been received.

(b)        If, after the receipt of the notice to the obligor, the obligor shall make further payments to a contractor or subcontractor against whose interest the lien or liens are claimed, the lien shall continue upon the funds in the hands of the contractor or subcontractor who received the payment, and in addition the obligor shall be personally liable to the person or persons entitled to liens up to the amount of such wrongful payments, not exceeding the total claims with respect to which the notice was received prior to payment.

(c)        If an obligor shall make a payment after receipt of notice and incur personal liability therefor, the obligor shall be entitled to reimbursement and indemnification from the party receiving such payment.

(d)        If the obligor is an owner of the property being improved, the lien claimant shall be entitled to a lien upon the interest of the obligor in the real property to the extent of the owner's personal liability under subsection (b), which lien shall be enforced only in the manner set forth in G.S. 44A-7 through G.S. 44A-16 and which lien shall be entitled to the same priorities and subject to the same filing requirements and periods of limitation applicable to the contractor.

"§ 44A-21.  Pro rata payment. — In the event that the funds in the hands of the obligor and the obligor's personal liability, if any, under the previous section are less than the amount of valid lien claims that have been filed with the obligor under this Article the parties entitled to liens shall share the funds on a pro rata basis.

"§ 44A-22.  Priority of lien. — Liens perfected under this Article have priority over all other interests or claims theretofore or thereafter created or suffered in the funds by the person against whose interest the lien is asserted, including, but not limited to, liens arising from garnishment, attachment, levy, judgment, assignments, security interests, and any other type of transfer, whether voluntary or involuntary. Any person who receives payment from an obligor in bad faith with knowledge of a claim of lien shall take such payment subject to the claim of lien.

"§ 44A-23.  Contractor's lien; subrogation rights of subcontractor . — A first, second or third tier subcontractor, who gives notice as provided in this Article, may, to the extent of his claim, enforce the lien of the contractor created by Part 1 of Article 2 of this Chapter. The manner of such enforcement shall be as provided by G.S. 44A-7 through G.S. 44A-16. Upon the filing of the notice and claim of lien and the commencement of the action, no action of the contractor shall be effective to prejudice the rights of the subcontractor without his written consent."

Sec. 1.1.  Article 2 of Chapter 44A of the General Statutes is hereby amended by adding at the end thereof a new Part 3 to read as follows:

 

"Part 3. Criminal Sanctions.

Criminal sanctions for furnishing a false statement in connection with improvement to real property.

"§ 44A-24.  False statement a misdemeanor. — If any contractor, subcontractor or other person receiving payment from an obligor for an improvement to real property shall knowingly furnish to an obligor a false written statement of the sums due or claimed to be due for labor or material furnished at the site of an improvement to real property, and, after the furnishing of said false statement, receive payment from an obligor, such person shall be guilty of a misdemeanor and upon conviction shall be punished by a fine not to exceed five hundred dollars ($500.00), by imprisonment not to exceed six months, or by both, in the discretion of the Court. The elements of the offense herein stated are the furnishing of the false written statement with knowledge that it is false and the subsequent receipt of payment from an obligor by the person furnishing said statement, and in any prosecution hereunder it shall not be necessary for the State to prove that the obligor relied upon the false statement or that any person was injured thereby."

Sec. 2.  Specific repealer. — The following sections of the General Statutes of North Carolina are repealed:

G.S. 44-6

G.S. 44-8

G.S. 44-9

G.S. 44-10

G.S. 44-11

G.S. 44-12

G.S. 44-13

Sec. 3.  All laws and clauses of laws in conflict with this act are hereby repealed.

Sec. 4.  This act shall become effective on and after October 1, 1971, and shall not affect pending litigation.

In the General Assembly read three times and ratified, this the 16th day of July, 1971.