The Great Contractor Lien Extension Caper
This piece is directed to property owners and contractors alike. The contractor’s lien is a versatile tool, or hammer, depending on your perspective. It allows a contractor to file a claim of lien within 120 days after the contractor last performed work or provided materials on the project. The lien expires unless the contractor files suit within 180 days after the last date of work.
I refer to the lien statute as a hammer because it has provisions allowing a contractor’s lien to become effective on the first date of the contractor’s work, even if the contractor has been paid for that work. Moreover, the filing of a lien, even when the quality or cost of the work has been disputed by the homeowner, can create problems and friction between the homeowner and her lender.
In yet another twist, some contractors are combining the lien statute with the provisions of a rule of North Carolina procedure to extend the 180-day time period by which a contractor must pursue a lawsuit. It works like this: First, the contractor must timely file and serve the claim of lien within the initial 120-day period. Then, the contractor must file and serve a lawsuit on the homeowner within the 180-day period. Some contractors, generally those that are trying to preserve their rights but don’t have the money to pursue litigation, then dismiss the lawsuit without prejudice before the homeowner has an opportunity to hire an attorney or file a counterclaim. The dismissal then extends the deadline to file the lawsuit to foreclose on the lien for an entire additional year.
While this tactic might create a prolonged delay in resolving the lien and a difficult situation for the homeowner it is, for now, a strategy approved by the North Carolina Supreme Court. See Newberry Metal Masters Fabricators, Inc. v. Mitek Indus., Inc., 333 N.C. 250 (1993). However, a contractor who employs such a strategy must be careful not to waive any arbitration clause contained in the contract and should be aware that this tactic might be countered with a claim that the contractor is using the courts for an improper purpose.
If you are a contractor and you need help enforcing your lien rights--or if you are a property owner wondering what to do about a contractor's lien--the construction lawyers here at Asheville Legal have extensive knowledge of the lien filing processes to help you navigate this landscape. Give us a call today to find out how we can help.