ON REAL PROPERTY
Furnishers of labor, materials, rental equipment, or professional design or surveying services to the parties listed below. [44A-11.2]
-Person contracting directly with owner. Engineering services are covered. [Ramey Kemp & Associates, Inc. v. Richmond Hills Residential Partners, LLC, 737 S.E.2d 420 (N.C.App.,2013)]
-First-tier sub may enforce contractor’s lien through subrogation, if all steps are followed.
-First-, second- or third-tier subs (including suppliers) may file a claim of lien where (1) they comply with requirements to bring claim against contract funds, AND (2) the owner pays the general or sub anyway, without withholding enough to cover liens. [44A-20]
-Second- and third-tier subs may enforce contractor’s lien via subrogation, even where the first-tier sub has been paid IF the owner still owes money to the contractor and IF the contractor still has lien rights against the owner. This right of claim is limited, however, if, within 30 days after the later of (a) the building permit is issued or (b) the general contractor is awarded the contract, the owner or general contractor posts on the property and files with court clerk a signed Notice of Contract, AND, either (a) the second- or third- tier sub doesn’t serve a Notice of Subcontract, OR, (b) the claimant gives the Notice of Subcontract and the general serves written notice of payment within five days of receiving each payment. [44A-23; Schor at §34.03[C]; Electric Supply Co. v. Swain Elec. Co., 328 N.C. 651, 654, 403 S.E.2d 291, 293 (1991)]
NOTE that where a claimant’s contract exceeds the amount for which the claimant’s license allows it to contract, then the claimant’s recovery (i.e., the total amount the claimant will be entitled to recover on the contract, thus it includes funds received prior to problems arising) will be limited to the amount of its license. [McK Enterprises, LLC v. Levi. 722 S.E.2d 798, Unpublished Disposition (N.C.App., 2012)]
NOTE that if a claimant is supplying a supplier knowing where the product will ultimately be used, and the claimant is selling the product to the supplier specifically for use in that project, then the claimant (a supplier to a supplier) will be able to make a claim. [Queensboro Steel Corp. v. East Coast Mach. & Iron Works, Inc., 346 S.E.2d 248, 82 N.C.App. 182, review denied 349 S.E.2d 865, 318 N.C. 508 (1986); Raleigh Paint & Wallpaper Co. v. Peacock & Associates, Inc., 247 S.E.2d 728, 38 N.C.App. 144 (1978), review denied 251 S.E.2d 470, 296 N.C. 415; Forsyth Memorial Hosp., Inc. v. Armstrong World Industries, Inc., 122 N.C.App. 413, 470 S.E.2d 826 N.C.App. 1996)]
NOTE that unlicensed contractors and subs may file a lien, but they are not entitled to bring a breach of contract claim against an owner. They are also barred from recovering in quantum meruit. They are, however, allowed to bring breach of contract claims against each other. [87-1 et seq.; Voller Realty & Const., Ltd. v. D.V. Holdings, Inc., 687 S.E.2d 318 (N.C.App., 2009); Lato Holdings, LLC v. Bank of North Carolina, 691 S.E.2d 96 (N.C.App.,2010); Builders Supply v. Midyette, 274 N.C. 264, 270, 162 S.E.2d 507 (1968)] Note also that, where the owner is overseeing the project, ordering materials, and coordinating subs, a claimant who contracts directly with the owner will not be considered a general contractor in terms of licensing requirements and the ability to file breach of contract or quantum meruit claims. One of the key factors in determining whether a party is a general contractor is the degree of control they have over the project. [Brown’s Builders Supply, Inc. v. Johnson, 769 S.E.2d 653 (Ct.App. 2015)]
For Notice of Contract, please contact Levy von Beck and Associates for form information.
For Notice of Subcontract, please contact Levy von Beck and Associates for form information. [44A-23]
ON FUNDS DUE CONTRACTOR, SUB, ETC:
First-tier sub that furnishes labor, materials or rental equipment to general can claim a lien against funds owed to the general. A second-tier sub supplying labor, materials or rental equipment can claim against the funds owed to the first-tier sub, and can also be subrogated to first-tier sub’s claim. Case law holds, however, that second-tier subcontractors cannot assert a claim of lien upon funds when no funds are owed to the first-tier subcontractor at or after the time the second-tier subcontractor files its claim of lien. [Electric Supply Co. v. Swain Elec. Co., 328 N.C. 651, 654, 403 S.E.2d 291, 293 (1991); Park East Sales, LLC v. Clark-Langley, Inc., 651 S.E.2d 235 (N.C. App. 2007)] A third-tier sub supplying labor, materials or rental equipment can claim against the funds owed to the second-tier sub, and can also be subrogated to the second-tier or first-tier sub’s claim. To be subrogated, the claimant must give the notice. Please contact Levy von Beck and Associates for form information. Furnishers of labor or materials to anyone on project more remote than the second-tier sub cannot be subrogated to higher-tiered subs’ interest. NOTE ALSO if the subcontractor’s lien arises only through subrogation, then the sub is limited to the rights of the contractor, thus the sub’s lien against the contract funds cannot be greater than the amount owed to the general at the time the owner received the claimant’s notice of claim. [Watson Electrical Const. Co. v. Summit Companies, LLC, 160 N.C.App. 647, 587 S.E.2d 87 (2003); O & M Industries v. Smith Engineering Co., 624 S.E.2d 345 (N.C. 2006); 44A-8, 44A-18, 44A-23]