NORTH CAROLINA’S TOP 10 CONSTRUCTION LAW PRACTICES
New rules on renewing and
canceling your Notice to Lien Agent
Luke J. Farley, Sr.

Conner Gwyn Schenck PLLC
When you’re in a payment dispute
as a contractor, your greatest lever-
age can be your right to file a lien on
the project, so anytime there are
changes to the North Carolina lien
law, it’s important to take note. The
biggest change to the law in the last
20 years was the establishment in
2013 of the lien agent system and
the LiensNC.com website to support
it. Come this fall, those laws will
change again.

The state legislature recently
added new rules for renewing and
canceling a “Notice to Lien Agent,”
one of the key document filings
under the 2013 law. These changes
take effect on Oct. 1. This article pro-
vides a refresher on the original lien
agent law, highlights and explains
the upcoming changes, and sug-
gests some best practices to help
you comply with the new law.

Since 2013, project owners have
been required to appoint a lien agent
for private projects where the cost of
the project was $30,000 or more.

The lien agent is a title insurance
company that receives information
about the identity of potential lien
claimants who’ve supplied labor or
materials to the project. After the
lien agent is appointed, subcontrac-
tors and suppliers are then responsi-
ble for filing (yet another) document,
the Notice to Lien Agent, which in-
cludes the potential claimant’s con-
tact information and a description of
the project.

The lien agent process creates a
registry of potential lien claimants on
a project and puts the owner on no-
tice of the existence and identity of
subcontractors and suppliers that
might be owed money. This, in turn,
allows the owner to be sure subcon-
tractors and suppliers have been
paid by the general contractor and
obtain the appropriate lien waivers at
14 — Fall 2018 — The North Carolina Construction News
the end of the job. The lien agent
system is meant to avoid the so-
called “hidden lien” problem that
arises when the lien isn’t filed until
after the project is finished. Owners
bear a risk that they’ll pay a general
contractor and learn only later the
general contractor hasn’t been pay-
ing its subcontractors and suppliers
down the chain.

Filing a Notice to Lien Agent has
become an important part of protect-
ing your lien rights. The best practice
is for all subcontractors and suppli-
ers to electronically file the notice
through the LiensNC.com website
for every project that meets the
$30,000 threshold. While filing a No-
tice to Lien Agent on every project
may seem time consuming and ex-
pensive, the benefits generally out-
weigh the costs. Not filing a Notice
to Lien Agent can result in losing
your lien rights, which in a payment
dispute are usually your greatest
leverage. The most important change com-
ing to the lien agent process is that
your Notice to Lien Agent will now
expire after five years if you don’t
renew it. In light of this change, you
may need to develop a system to
track when your notices expire. This
could be something as simple as an
Excel spreadsheet.

As a practical matter, the new ex-
piration date may not be much of an
issue unless you’re involved with a
big project that takes years to finish.

Most projects don’t have a lifespan
greater than five years. If, however,
you have a need to keep your Notice



to Lien Agent alive beyond the initial
five-year term, you can renew it once
for one additional five-year period. If
you have to renew your notice, you
need to do it before the original no-
tice expires. If you allow a notice to
expire, you can’t renew it afterward.

Does the new five-year expiration
period apply to old notices? The leg-
islation doesn’t say whether it ap-
plies retroactively to notices filed
before Oct. 1. If you have on-going
projects for which you haven’t yet
been paid, the safest course of ac-
tion would be to figure out which no-
tices are about to expire and file a
renewal. Remember though for
retroactivity to be a concern you’d
need to have filed your Notice to
Lien Agent sometime back in 2013,
so again it won’t be an issue for
most projects.

The second major change to the
lien agent process is a new obliga-
tion to cancel your Notice to Lien
Agent if the project is a one or two-
family dwelling. The new cancelation
requirement seems meant to ensure
that houses, which are often sold
soon after they’re finished, will have
totally clean title at the time of sale
with nothing in the public record to
suggest otherwise.

If you’ve filed a Notice to Lien
Agent on a house project, the new
rules require you to cancel your no-
tice within a “reasonable amount of
time” after receiving final payment.

That phrase isn’t defined in the
statute, but prudence dictates that
you shouldn’t cancel the notice until
the final check clears and you know
the funds are good. After that, it’s
probably best not to wait more than
thirty days to cancel your notice.

The law doesn’t specify the con-
sequences if you don’t cancel in a
timely fashion, but it’s not worth
finding out. The most convenient
way to cancel the notice is through
the LiensNC.com website and con-
venience here is crucial, since can-
celing your notice is now another
administrative task to deal with. Re-
member, though, you have no obliga-
tion to cancel your notice unless the
project is a one or two-family home.

For all other types of projects, just
allow the notice to expire automati-
cally on its own.

The last change worth mentioning
won’t surprise anyone in the con-
struction industry. Like the cost of
labor and materials, the cost to file a
Notice to Lien Agent is going up,
though the culprit here isn’t a tariff or
a skilled labor shortage. The filing
fee for a one or two-family house
has gone from $25 to $30, a 20 per-
cent increase. The filing fees on all
other types of projects are increas-
ing from $50 to $58, a 16 percent in-
crease. The fee increases could be
especially costly for anyone doing
high volume residential work, like
subcontractors and suppliers work-
ing for large tract home builders. An
extra $5 per notice per house could
add up quickly.

The new rules on renewing and
canceling Notices to Lien Agent
don’t make any fundamental
changes to the lien agent system,
but they could dramatically affect
your lien rights under some circum-
stances and they add new costs and
administrative burdens.

There are probably more tweaks
coming. Adding a lien agent to the
mix was the biggest change to North
Carolina lien law in decades, so you
can expect that the state legislature
will continue to fine tune the law as
the construction industry gains more
practical experience working with
lien agents.

Luke J. Farley, Sr. is a construction
and surety lawyer in the Raleigh of-
fice of Conner Gwyn Schenck PLLC.

His practice focuses on contract dis-
putes, lien and bond claims, and li-
censure of contractors and
engineers. He can be reached at
lfarley@cgsplic.com or by phone at
(919) 789-9242.

2018-2019 edition
The North Carolina Construction News — Fall 2018 — 15