What’s a Lien Agent, and why is it holding up my permit?

Your project is ready for permitting.  You take the drawings and permit application down to your friendly neighborhood Inspections Department and they tell you, “We’re sorry.  We can’t give you a permit until you fill out this additional form with your Lien Agent information.”  Huh?

If you have no clue what a Lien or a Lien Agent is, don’t feel bad.  You’re not the only one.  But anyone wanting to pull a permit for most projects with a value of $30,000 or more will have to learn.

First, a little education:  A Lien is a legal security that is attached to a property to secure payment of an unpaid obligation.  Often, a lien is filed to protect a contractor who has performed work, but has not been paid.  The lien is removed when the contractor is paid.  This usually means that the property cannot be sold without first satisfying the lien holder.

In North Carolina, a claim of lien must be filed within 120 days of last performance.  In other words, if ABC Electrician works on a project, submits an invoice, and doesn’t get paid, they have 120 days from the last day they were on the job to file a claim of lien.

Therein lies the problem.  Many times, projects (single family homes, especially) are constructed and sold before that deadline passes.  Mortgage insurance companies have seen a spike in unanticipated liens after closing.  It reached a point that something needed to be done if they were to continue doing business in North Carolina.

The Lien Agent was born!  A Lien Agent is an entity that is responsible for keeping track of all potential liens on a property.

Why does this matter when it comes to applying for a building permit?  A new law in North Carolina (enacted in July, 2012) has gone into effect as of April 1st, 2013.  It requires Owners to register their projects with a Lien Agent, and provide that information to the Inspections Department at time of permit application.  The registration process is fairly painless, just go to http://www.liensnc.com/ to start the process.  It will ask for information the Owner should already know.  Registration costs $50 per project ($25 for 1- or 2-family residence).

After registration, contractors, subcontractors and consultants can give notice that they are working on the project, and that they wish to preserve their lien rights.  Also, Owners can track their projects and associated filings.

The bottom line is that with this new process, this information is now consolidated, trackable, and on record so that properties are sold free and clear of any incumbrances.

Clear as mud, right?

My only comment is that this doesn’t seem to be a big issue with commercial projects, so hopefully the State Legislature will take a look at limiting this to residential projects only, as other states do.

More information is available at:  http://www.liensnc.com/



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