2009 Hot Legal Topics.Lien Law


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2009 Hot Legal Topics.Lien Law

  1. 1. THREE STRIKES AND YOU MAY BE OUT The Status Of Lien Law In North Carolina 2009
  2. 2. SHORT LIEN LAW REVIEW <ul><li>44A-12: Claim of Lien on Real Property (contract with owner) </li></ul><ul><li>44A-18 & 19: Notice of Claim of Lien upon Funds (Subcontractor) </li></ul><ul><li>44A-23: Subrogated Claim of Lien on Real Property (Subcontractor) </li></ul>
  3. 3. LIEN ON REAL PROPERTY AND RELATION BACK <ul><li>Once a Claim of Lien on Real Property is filed with the Clerk, it relates back to and is effective as of the date of first furnishing. </li></ul><ul><li>Why does this matter? </li></ul>
  4. 4. 2009 – AN EVENTFUL YEAR IN LIEN LAW <ul><li>Legislature got in the act (almost) </li></ul><ul><li>Bankruptcy Court (Eastern District) also got in the act (totally) </li></ul>
  5. 5. FIRST SWING OF THE BAT – TITLE INSURERS <ul><li>SB 803 Proposed at behest of the Title Insurance Industry </li></ul><ul><li>Aimed at ending relating back if a new purchaser closes a sale before a lien is filed (the infamous “hidden lien”) </li></ul>
  6. 6. LEGISLATIVE STATUS <ul><li>Did not get out of Senate Committee (this year) </li></ul><ul><li>Is subject of a “Funded Study Commission” </li></ul><ul><li>Lobbying to come </li></ul>
  7. 7. STUDY COMMISSION MAKE-UP <ul><li>Four Members of the Senate and three members of the public appointed by the President Pro Tempore of the Senate. </li></ul><ul><li>Four members of the House of Representatives and three members of the public appointed by the Speaker of the House of Representatives. </li></ul><ul><li>The members of the public shall be as follows: </li></ul><ul><ul><li>A representative of a title insurance company; </li></ul></ul><ul><ul><li>A practicing real estate attorney; </li></ul></ul><ul><ul><li>A representative of a bank; </li></ul></ul><ul><ul><li>A material supplier or subcontractor or representative of a material supplier or subcontractor; </li></ul></ul><ul><ul><li>A residential home builder or a representative of a residential home builder, and; </li></ul></ul><ul><ul><li>A commercial contractor or representative of a commercial contractor. </li></ul></ul>
  8. 8. STRIKE TWO <ul><li>Shearin, Harrelson Utilities, Mammoth Grading Decisions </li></ul><ul><li>Chaos in the Eastern District </li></ul><ul><li>Does it matter in the Middle and Western Districts? </li></ul><ul><li>And what are the “Districts anyway”? </li></ul>
  9. 9. CRUX OF THE DECISIONS <ul><li>Neither Notices of Claims of Lien upon Funds nor Subrogated Liens on Real Property may be filed after a bankruptcy petition has been filed </li></ul>
  10. 10. MORAL OF THE STORY <ul><li>Serve your Lien on Funds at the first sign of trouble (or as early as you dare) or risk having your lien rights severed </li></ul>
  11. 11. CURRENT STATUS OF THE APPEAL <ul><li>A number of subcontractors and suppliers with sizeable dollar amounts at issue have filed notices of appeal in Harrelson Utilities and Mammoth Grading </li></ul><ul><li>It is possible Amicus Curiae briefs will be filed as well </li></ul><ul><li>Decision sometime in 2010 </li></ul>
  12. 12. POSSIBLE OUTCOMES <ul><li>Legislative Remedy </li></ul><ul><li>Appellate Remedy </li></ul><ul><li>Further Appeal </li></ul><ul><li>Industry Changes reacting to the court action </li></ul>
  13. 13. THE THIRD STRIKE? <ul><li>No one knows right now, but the lien law seems to be under fire, so bet on another pitch. </li></ul><ul><li>May be the Bankruptcy Court in Mammoth addressing the Preference Issue </li></ul><ul><li>So, what is a “preference” and why might this matter? </li></ul>
  14. 14. Thank You! 1720 Hillsborough Street, Suite 200 | Raleigh, NC 27605 Tel: 919-510-8585 | Fax: 919-510-8570 1200 East Morehead Street • Suite 251 • Charlotte, NC 28204 Phone: 704-496-7495 • Facsimile: 704-496-7480 www.vannattorneys.com