In today’s issue of NewsBreak, the Carolinas AGC (CAGC) reports the double payment/lien legislation passed the NC State House, in a 101-0 vote. The House sent to the Senate HB 1052 (Mechanics Liens/Payment Bond Reforms), a bill that would help solve problems concerning double payment issues for contractors and bankruptcy issues that jeopardize lower-tier specialty contractors. Passage of the bill, which will be considered in a Senate judiciary committee and then the full Senate, is a top priority of CAGC.
Senate Bill 42 (Mechanics Liens, Private Lien Agent), which would take effect April 1 of next year, also passed the House last week. It next will go to the Senate for concurrence, and if the Senate concurs, the bill will be enacted. Two House members had been prepared to run on the House floor on June 21 an amendment which on the previous day failed in the House Judiciary B Committee on SB 42. The amendment, which was not offered up on the House floor, said:
“Upon receipt of notice from a potential lien claimant pursuant to this section, no action by a contractor shall be effective to prejudice the rights of the subcontractor without the subcontractor’s written consent.”
Last week, during the judiciary committee meeting, Matt Bouchard, a Raleigh construction attorney with Lewis & Roberts and a CAGC member, told the committee that this proposal could slow up the payment process for everybody, particularly if there were a disgruntled second- or third-tier subcontractor who refuses to sign a lien waiver.
Dave Simpson, NC government relations and Building Division director for CAGC, along with other construction industry representatives, successfully urged the committee not to have SB 42 take effect as early as January 1, 2013, saying more time is needed to educate the construction industry about the complex SB 42. The bill, if approved, would take effect April 1 of next year, not July 1 as previously proposed.
Also, under the original bill, lower-tiered subcontractors and suppliers would only be able to recover against a payment bond for labor and materials provided within to 60 days prior to having notified the contractor in writing that they were providing labor materials on the job. Representatives of the aggregates industry earlier this month offered in a committee meeting an amendment that would extend that look-back period to 75 days. In addition, the original bill only would apply to jobs of $10,000 or more. The aggregates representatives offered an amendment raising that ceiling to $25,000.
In that meeting, CAGC told committee members that the 60-day threshold was adequate, noting that South Carolina has no such time period and that most states with related laws only have 20-30 day look-back periods, with only two having a 60-day look-back period. CAGC also urged the committee to reduce the threshold from the proposed $25,000 to $20,000, noting that building contractors have lost millions of dollars in having to pay twice for the same materials. Â At the same time, CAGC said, because of the fragile nature of the compromise legislation, CAGC did not want to do anything that would jeopardize the bill at a time when the NC General Assembly is winding down its short session.
The Judiciary Subcommittee B voted to reduce the proposed threshold from $25,000 to $20,000 but to keep the look-back period to 75 days. Concerning bankruptcy issues, the proposal would clarify that lower-tiered subcontractors would have the same ability as contractors to recover on lien claims once a higher-tiered party files for bankruptcy.
Meantime, CAGC will continue to be heavily involved with ongoing efforts concerning hidden-lien problems that title insurer and banking interests are trying to resolve through proposed legislation that would set up a lien agent notice requirement to perfect a claim of lien on real property. Under this process, contractors, subcontractors and suppliers would all have to notify an independent lien agent of their work on a project in order to make sure their lien claims took priority over a subsequent buyer’s interest. The lien agent process would apply to any project larger than $30,000. Read More.