North Carolina Court of Appeals Makes Strict Interpretation of Lien Requirements

The North Carolina Court of Appeals recently issued an opinion in K. Lee Builders, Inc. v. Thomas Scotte Barnes, COA25-1029, that may have a significant impact on contractor’s and subcontractor’s lien rights.

Background

Lee Builders entered into a construction contract with Mr. Barnes to construct Mr. Barnes’ home. K. Lee Builders performed work but ultimately filed a lien due to nonpayment by Mr. Barnes arising out of a dispute regarding the quality of certain components of the work.

The lien incorrectly identified the dates labor was first and last furnished to the property. The date identified as the date of first furnishment was prior to the actual date of first furnishment. The date identified as the date of last furnishment was prior to the actual date of last furnishment. Mr. Barnes eventually bonded off the lien. At issue in the case was whether identification of the incorrect dates rendered the lien unenforceable.

The Court’s Decision

The Court had previously determined that a missing date of last furnishment rendered a lien unenforceable. The Court took the same position with respect to an incorrect date of last furnishment. It reasoned that, because the date of last furnishment is necessary to enforce the lien—given that the lien must be filed within 120 days of last furnishment of labor or materials— an incorrect date also rendered the lien unenforceable. While the Court appears to leave room for an exception for obvious scrivener’s errors, it is unclear how such an exception would apply. Interestingly, the Court took this draconian approach despite the fact that no party was prejudiced by the error and K. Lee Builders actually filed the lien within the 120-day period after the actual date of last furnishment of labor and materials, which was later than the date included in the lien. While the Court does not directly address whether an inaccurate date of first furnishment would render a lien unenforceable, it implies that may be the case because such an incorrect date would affect the date of attachment and, thus, could impact title searches.

Why This Matters for Contractors and Subcontractors

This decision highlights the importance of conducting a careful and complete investigation before filing a construction lien in North Carolina. Contractors, subcontractors, and suppliers should confirm that all information in the claim of lien is complete and accurate, particularly the dates labor or materials were first and last furnished to the project.

An inaccurate lien filing could have consequences well beyond the lien itself. If a lien is found unenforceable, the claimant may lose important leverage and security for payment, which could affect recovery even if the claimant later obtains a judgment for breach of contract.

Key Takeaways 

Contractors, subcontractors, and suppliers should consider the following steps before filing a North Carolina construction lien:

• Confirm the actual date labor or materials were first furnished to the property.
• Confirm the actual date labor or materials were last furnished to the property.
• Review project records, invoices, delivery tickets, field reports, emails, and payment applications before filing.
• Avoid estimating furnishing dates unless the dates have been verified.
• Treat lien preparation as a legal and factual investigation, not a routine form filing.

Case law addressing this issue is likely to continue developing. Although the amount at issue in K. Lee Builders was relatively nominal, the decision could have significant implications for the construction industry. It will be worth watching whether K. Lee Builders seeks review by the Supreme Court of North Carolina and whether future decisions clarify the scope of any exception for scrivener’s errors.

If you have questions about how this decision or other recent court decisions may affect your lien rights, contracts, or construction projects, please contact Andrew Atkins or your regular Smith Anderson attorney.