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Lien Legislation Moving Toward Enactment in North Carolina

Thursday, June 21, 2012  

Lien and payment bond legislation once again is moving in North Carolina. HB 1052/SB 864 deal with liens on private construction projects and claims on payment bonds in public projects. We have a fight last year on HB 489, which ultimately was turned into a study bill. It carried over to 2012 and has not moved in the Senate Judiciary Committee.

This year’s bills are an improvement over the 2011 versions. There was considerable negotiation among the interested parties since 201 to produce this year's legislation. Section 11 of the current legislation, which amends G.S. 44A-27, contains a provision from 2011 legislation, which we questioned last year The North Carolina law currently permits payment bond claims from remote subcontractors—second and third tier. Both the House and Senate bills would require such remote subcontractors to file a written notice of public subcontract, and in particular, the bills would limit what the remote subcontractor could recover on a payment bond based on when the notice of the public subcontract is filed.

SFAA and AIA questioned the provision affecting the payment bond again this year. It is unusual for the claims under the payment bond to be tied to and limited by whether the contractor provided a copy of the payment bond. Under 44A-27(b), unless the general contractor fails to provide a copy of the payment bond within seven calendar days as required, a payment bond claim may not include claims for materials and services provided more than 60 days prior to filing the notice of subcontract under the Senate bill and 75 days under the House bill. Although SFAA is not opposing the provision, we have advised that it is unusual.

SFAA also believes that the provisions regarding liens on private projects could be improved. We propose to simplify the cumbersome lien requirements by establishing a payment bond in lieu of a lien on a private project. We believe that if the general contractor has a payment bond in place on a private project that should be the subcontractors’ remedy in lieu of liens on the property. Under current law, the owner already can obtain a release of lien bond that guarantees payment in the event that the lien is valid and enforceable. A payment bond from the general contractor may be an alternative way to address future lien issues upfront on the job.

At this point, the lien legislation has no opposition. The general contractors, subcontractors and specialty contractors have testified in support of it. We believe that the lien legislation will move forward to enactment.


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