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Different Lien Rights for Contractors and Sub-contractors


Most contractors and sub-contractors understand their ability to file liens against the builder if there are payment issues. But although contractors and sub-contractors both have the ability to file a lien and perfect that lien by filing suit, they do not in fact hold the same lien rights. It’s important to distinguish between the North Carolina statutory bases for the two different lien claims so that sub-contractors can be aware of when they need to exert their lien rights.

Contractors rely on N.C.G.S. 44A-12, which requires a direct contract between the claimant and the individual with whom they contracted for the furnishing of labor or materials. This is called privity of contract, and sub-contractors don’t have it. Subs, your contract is with the general contractor and not with the property owner.

Subcontractors must rely primarily on N.C.G.S. 44A-18, which sets forth that a first, second, or third-tier subcontractor can claim a lien on funds that are owed to the contractor that arise out of the improvement that the subcontractor worked or furnished materials. Here’s the difference, subcontractors can only recover under this statute from the funds that are actually owed to the general contractor. The building owner may have a defense against a claim from the sub by setting forth that they do not owe any money to the general contractor – whether they were paid, or via a breach of contract from the general contractor. This slight limitation can hurt the sub-contractors; subs, make sure that you utilize your lien rights before the owner can rightfully claim that all of the money that is owed to the general contractor has been paid out.

Construction Litigation has many statutes that are strictly constructed and require quality construction litigation representation for contractors. Maginnis Law, PLLC practices construction litigation in Raleigh, Cary, Wake Forest, Zebulon, Clayton and the rest of Wake and Johnston Counties. Contact the firm at 919.526.0450 to schedule a consultation or visit our website at www.maginnislaw.com

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