North Carolina § 44A-18 - Grant of lien upon funds; subrogation; perfection.

§ 44A-18. Grant of lien upon funds; subrogation; perfection.

A first tier subcontractor who furnished labor, materials, or rental equipment at the site of the improvement shall have a lien upon funds that are owed to the contractor with whom the first tier subcontractor dealt and that arise out of the improvement on which the first tier subcontractor worked or furnished materials. A second tier subcontractor who furnished labor, materials, or rental equipment at the site of the improvement shall have a lien upon funds that are owed to the first tier subcontractor with whom the second tier subcontractor dealt and that arise out of the improvement on which the second tier subcontractor worked or furnished materials. A second tier subcontractor, to the extent of the second tier subcontractor's lien provided in this subdivision, shall also be subrogated to the lien upon funds of the first tier subcontractor with whom the second tier contractor dealt provided for in subdivision (1) of this section and shall perfect it by service of the notice of claim of lien upon funds to the extent of the claim. A third tier subcontractor who furnished labor, materials, or rental equipment at the site of the improvement shall have a lien upon funds that are owed to the second tier subcontractor with whom the third tier subcontractor dealt and that arise out of the improvement on which the third tier subcontractor worked or furnished materials. A third tier subcontractor, to the extent of the third tier subcontractor's lien upon funds provided in this subdivision, shall also be subrogated to the lien upon funds of the second tier subcontractor with whom the third tier contractor dealt and to the lien upon funds of the first tier subcontractor with whom the second tier subcontractor dealt to the extent that the second tier subcontractor is subrogated thereto, and in either case shall perfect it by service of the notice of claim of lien upon funds to the extent of the claim. Subcontractors more remote than the third tier who furnished labor, materials, or rental equipment at the site of the improvement shall have a lien upon funds that are owed to the person with whom they dealt and that arise out of the improvement on which they furnished labor, materials, or rental equipment, but such remote tier subcontractor shall not be entitled to subrogation to the rights of other persons. The liens upon funds granted under this section shall secure amounts earned by the lien claimant as a result of having furnished labor, materials, or rental equipment at the site of the improvement under the contract to improve real property, including interest at the legal rate provided in G.S. 24-5, whether or not such amounts are due and whether or not performance or delivery is complete. In the event insufficient funds are retained to satisfy all lien claimants, subcontractor lien claimants may recover the interest due under this subdivision on a pro rata basis, but in no event shall interest due under this subdivision increase the liability of the obligor under G.S. 44A-20. A lien upon funds granted under this section arises, attaches, and is effective immediately upon the first furnishing of labor, materials, or rental equipment at the site of the improvement by a subcontractor. Any lien upon funds granted under this section is perfected upon the giving of notice of claim of lien upon funds in writing to the obligor as provided in G.S. 44A-19. Until a lien claimant gives notice of a claim of lien upon funds in writing to the obligor as provided in G.S. 44A-19, any owner, contractor, or subcontractor against whose interest the lien upon funds is claimed may make, receive, use, or collect payments thereon and may use such proceeds in the ordinary course of its business. History (1971, c. 880, s. 1; 1985, c. 702, s. 3; 1995 (Reg. Sess., 1996), c. 607, s. 3; 2005-229, s. 1; 2012-175, s. 6.) Editor's Note. - Session Laws 2012-175, s. 13, made the amendments to this section by Session Laws 2012-175, s. 6, applicable to improvements to real property for which the first permit required to be obtained is obtained on or after January 1, 2013, or, with respect to projects for which no permit is required, apply to improvement to real property commenced on or after January 1, 2013. Effect of Amendments. - Session Laws 2012-175, s. 6, effective January 1, 2013, deleted the introductory paragraph; redesignated former subdivisions (1) through (6) as present subsections (a) through (f); substituted "shall have a lien" for "shall be entitled to a lien" in subsections (a) and (d) and in the first sentence of subsections (b) and (c); in the last sentence in subsection (b), substituted "subrogated to the lien upon funds" for "entitled to be subrogated to the lien" and substituted "perfect it by service of the notice" for "be entitled to perfect it by notice"; in the last sentence of subsection (c), deleted "be entitled to" following "subdivision, shall also" near the middle, and substituted "subcontractor is subrogated thereto, and in either case shall perfect it by service of the notice of claim" for "subcontractor is entitled to be subrogated thereto, and in either case shall be entitled to perfect the same by notice of claim" near the end; rewrote subsection (f); and added subsection (g). For applicability, see editor's note. Legal Periodicals. - For article, "Mechanics' Liens for the Improvement of Real Property: Recent Developments in Perfection, Enforcement and Priority," see 12 Wake Forest L. Rev. 283 (1976). For survey of 1977 contract law, see 56 N.C.L. Rev. 926 (1978). For survey on subcontractors' statutory lien rights, see 70 N.C.L. Rev. 1996 (1992).