Bulletin: NC2013002

Dear Associates:

            The North Carolina Lien Agent law goes into effect on April 1, 2013. Any owner of a construction project of $30,000 or more (excluding owner renovations of an existing residence) is now required to appoint a mechanics lien agent (“MLA”) at the time the building permit is issued. The MLA duties include:

• Accept and maintain record of notices by potential lien claimants.
   
• Provide notices to owner, contractor, design professionals and potential lien claimants.
   
• Provide notices and copies of notices to owners, title companies, contractors, and closing attorneys/settlement agents of all potential lien claimants on a specific project.

Only title companies and title agents may act as MLAs. Registration with the NC Department of Insurance is required.

More information and all forms are available at the North Carolina mechanics lien registry:

www.liensnc.com

This system is designed as a central online clearinghouse for lien agents, attorneys, contractors, subcontractors, suppliers, lenders, and owners to submit and track notices relating to a construction project. Any title agent considering acting as a mechanics lien agent should consider using the LiensNC registry. This will require application to the site for use. Currently the statute allows fees to be collected to act as MLA in the amount of $25 for residential, $50 for commercial. All fees will be assigned to LiensNC if the MLA is registered with LiensNC.

Stewart Title Guaranty Company is a registered lien agent in North Carolina.

As part of our underwriting of this new statute we have new NC Land Title Association lien waiver forms and we have revised our lien waiver requirement that should be included in all commitments.

New NCLTA Form #5 Owner Affidavit and Indemnity is to be used for all projects subject to the new MLA process. Form #6 is the Waiver and Release of Liens in MLA project. Form #7 is the Subordination of Liens. Both Forms # 6 and #7 are used in conjunction with the Form #5 Owner Affidavit.

Here is the new lien waiver requirement that should be incorporated:

For insurance regarding priority of conveyance by seller to proposed insured owner over potential liens for labor, services or materials, including surveyors, architects, engineers and rental equipment  (herein "liens") of seller, or priority of proposed insured lender's deed of trust (once recorded) over said liens of seller and/or construction borrower, receipt of applicable NCLTA form (or substantially similar form approved by Company counsel prior to closing), completed and executed by all required parties in compliance with the applicable form's instructions regarding same, as follows:

For projects where labor, services or materials are first contracted for before April 1, 2013, or projects where no lien agent is required by NC law:

• NCLTA Form 1, if no recent construction or addition of improvements on land, no executory contracts for improvements on land and no construction loan by signing owner or borrower is contemplated;
  
  
• NCLTA Form 2, if construction on the land was recently completed;
  
  
• NCLTA Form 3, if construction is in process or immediately contemplated (for loan, including construction financing).

For projects where labor, services or materials are first contracted for April 1, 2013, or later, wherein a lien agent has been appointed:

• NCLTA Form 5, Owner Affidavit and Indemnity Agreement when construction has been completed, is contemplated or currently underway and a mechanics lien agent has been appointed (in conjunction with NCLTA Forms 6 and 7);
  
  
• NCLTA Form 6, for waiver and release of lien rights by Potential Lien Claimants having filed notice(s) to lien agents (in conjunction with NCLTA Form 5);
  
  
• NCLTA Form 7, for subordination of lien rights by Potential Lien Claimants having filed notice(s) to lien agents to any deed of trust to be insured (in conjunction with NCLTA Form 5).

In addition, if the proposed purchaser will be obtaining combined purchase and construction financing from proposed insured lender as a part of the transaction to be insured where labor, services, or material are first contracted for before April 1, 2013, or where no lien agent is required by NC law, proposed purchaser (construction loan borrower) must also provide duly completed and executed NCLTA Form 3.

For more information please contact jbarkley@stewart.com. 

If you have any questions relating to this or other bulletins, please contact a Stewart Title Guaranty Company underwriter.

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