Month: February 2015

Statutory Subcontract Limits & Requirements for North Carolina Subcontracts: The Short Summary©

Authored by attorney Neil Lowenstein1

Below is a short summary of some of the statutory requirements and constraints in the North Carolina code regarding subcontract requirements for North Carolina projects (commercial or public).

  1. Pay when paid (NCGS § 22C-2). Performance in accordance with its contract entitles subcontractors to payment (NCGS § 22C-2). Payment by an owner to a contractor is not a condition precedent for payment to a subcontractor, and payment by a contractor to a subcontractor is not a condition precedent to payment to any other subcontractor (NCGS § 22C-2).
  1. Prompt payment (NCGS § 22C-3). Contractors shall pay subcontractors and each subcontractor shall pay his subcontractors within 7 days of receipt by them of each periodic or final payment when those payments include payments for the subcontractors’ work or materials.
  1. Conditions precedent (NCGS § 22C-4). Payments can be conditioned upon satisfactory work and monies withheld for unsatisfactory progress, defective construction not remedied, disputed work, third-party claims filed or reasonable evidence that claims will be filed, untimely payment to lower tiers, damages to the contractor or another subcontractor, or reasonable evidence that the subcontract cannot be completed for the unpaid balance of the subcontract sum (NCGS § 22C-4). Additionally, retainage can be withheld, but not to exceed the initial percentage retained by the owner (NCGS § 22C-4).
  1. Indemnity provisions (NCGS § 22B-1). Construction indemnity agreements in violation of NCGS § 22B-1 – e.g., indemnifying someone else from their own negligence in full or in part – are invalid.
  1. Choice of law and forum selection clauses (NCGS § 22B-2). Forum clauses in contracts for the improvement of real property in North Carolina are void and against public policy if they: a) make the contract subject to the laws of another state; or b) provide exclusive forum for litigation, arbitration or other dispute resolution process in another state (NCGS § 22B-2).

Copyright 2015, Vandeventer Black LLP. Subcontract rights and obligations involve complex legal requirements. This summary of North Carolina subcontract related laws is for general information purposes and is not intended as specific legal advice.
 1 Neil Lowenstein is licensed in North Carolina, as well as Virginia and the District of Columbia. Neil chairs Vandeventer Black’s Construction and Government Contracts Practice Group.

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North Carolina Mechanic’s Lien Rights: The Short Summary

North Carolina Mechanic’s Lien Rights: The Short Summary©

Authored by attorney Neil Lowenstein1

Generally speaking, the North Carolina code structure gives two types of liens: 1) a claim of lien on real property; and 2) a claim of lien on funds. Attorney’s fees can also be discretionarily awarded by the court to the prevailing party (NCGS § 44A-35).

Perfecting and enforcing lien claims are statutorily driven (see NCGS Chapter 44A), complicated, and fact specific. Legal advice should be sought regarding specific issues or requirements, but the following briefly summarizes aspects of North Carolina law regarding claims of lien on real property and claims of lien against contract funds.

  1. CLAIM OF LIEN ON REAL PROPERTY:
  1. Remedy: Lien claim on underlying real property, for value of the improvements to that property, if the improvements provided pursuant to an express or implied contract for labor, materials, equipment, design or survey services, to the extent of the owner’s interest (NCGS §§ 44A-8 and -9). The claim of lien relates to and takes effect retroactively to time of the first furnishing of labor or materials (NCGS § 44A-10).
  1. Availability: Those with a direct contract with the owner (NCGS § 44A-8) or those with subrogation rights – first, second, and third-tier subcontractors (NCGS § 44A-23). Lower tiers have additional notice requirements (NCGS § 44A-23).
  1. Filing requirements: Claim of lien must be filed NLT 120 days from when labor or materials last furnished (NCGS § 44A-12). Claim of lien format must substantially comply with statutory form (NCGS § 44A-12(c)) and be filed in the office of the clerk of superior court where real property located (NCGS § 44A-12(a)).
  1. Time to enforce: Action to enforce claim of lien must be filed NLT 180 days from when labor or materials last furnished (NCGS § 44A-13(a)).
  1. Lien agent notice: Lien rights are lost if there is an intervening sale or mortgage prior to notice to lien agent. Lien agent notice required for all contracts for improvements worth $30,000 or more except work on existing owner-occupied residential structures.
  1. Responsibility to designate lien agent: Property owner is responsible to designate the lien agent NLT time owner first contacts with any person to improve real property (NCGS § 44A-11.1(a)). The N.C. Department of Insurance maintains an approved list; currently only title insurance companies and title insurance agencies qualify (NCGS § 44A-11.1(b)). See www.LiensNC.com (online NC lien agent system).
  1. Responsibility for providing contact information: Owners must provide lien agent contact information within 7 days of request to them (NCGS § 44A-11.2(b)). Contractors or subcontractors must provide lien agent contact information to lower-tier within 3 days of contracting with lower tier (NCGS § 44A-11.2(c)).
  1. Posting: Lien agent contact information should be posted with building permit or otherwise on site until completion of all construction (NCGS § 44A-11.2(d) and (e)). Lien agent contact notice must meet minimum statutory requirements (NCGS § 44A-11.2(f) and (i)).
  1. CLAIM OF LIEN ON FUNDS:
  1. Availability: Granted to all contractors of any tier to the extent of the monies owed to the tier immediately above them (NCGS § 44A-18).
  1. Timing: No time limit to file and is effective retroactively to first furnishing of labor, materials or rental equipment (NCGS § 44A-18(f)). But not perfected until notice of claim of lien upon funds given to obligor (NCGS § 44A-18(g)).
  1. Notice requirements:
  1. Substance: Notice must include all statutorily required information (NCGS § 44A-19(a)) and substantially follow statutory form for applicable tier (NCGS § 44A-19(b) and (c)).
  1. Service: Notices shall be served by personal delivery or by service authorized under Rule 4 of the North Carolina Rules of Civil Procedure (NCGS § 44A-19(d)). Notice does not get filed with the clerk of superior court, unless attached to a claim of lien on real property that is filed with the clerk or for purposes of discharging the claim of lien upon funds (NCGS § 44A-19(e)).
  1. Duties and liability of obligors: Upon receipt, obligors are under a duty to retain funds subject to all liens up to the total amount received (NCGS § 44A-20(a)). A perfected notice flows with any payments and obligors are personally liable up to the amounts of wrongful payments, up to the total of claims received prior to payment (NCGS § 44A-20(b)).
  1. LIEN CLAIM WAIVERS:
  1. Timing restrictions: Pre-work lien waivers of either claims of lien against real property or claims of lien against contract funds are void (NCGS § 44A-12(f)). But this does not prohibit later subordination or release (NCGS § 44A-12(f)).
  1. False statements: False written statements of sums due or claimed due are Class 1 misdemeanor, and additionally subject claimant to licensure disciplinary action (NCGS § 44A-24).

Copyright 2015, Vandeventer Black LLP. Subcontract rights and obligations involve complex legal requirements. This summary of North Carolina subcontract related laws is for general information purposes and is not intended as specific legal advice.
 1 Neil Lowenstein is licensed in North Carolina, as well as Virginia and the District of Columbia. Neil chairs Vandeventer Black’s Construction and Government Contracts Practice Group.

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North Carolina “Little Miller” Payment Bonds: The Short Summary©

Authored by attorney Neil Lowenstein1

Like many states, North Carolina has “Little Miller” code provisions intended for the protection of those that furnish labor or materials for North Carolina public projects since those persons cannot claim claims of lien against the real property. It covers the construction, reconstruction, alteration or repair of any public building or other public work or public improvement, including highways (NCGS § 44A-25). Below is a summary of certain key aspects of North Carolina’s public project payment bond laws:

  1. When Required (NCGS § 44A-26): When total amount of construction contracts for any one project exceeds $300,000 (NCGS § 44A-26(a)).
  1. Enforcement Time Constraints (NCGS § 44A-27 and § 44A-28): Must wait at least 90 days after the day on which the claimant last performed or furnished work or materials for which payment is claimed (NCGS § 44A-27(a)); but cannot exceed one year from the day on which the claimant last performed or furnished work or materials, or one year from the day on which final settlement was made with the contractor – whichever is longer (NCGS § 44A-28).
  1. Notice Requirement (NCGS § 44A-27): Notice required if not a direct subcontractor; which must be given within 120 days from the date on which the claimant last performed or furnished work or materials, stating with substantial accuracy the amount claimed and the name of the person for whom the work was performed or to whom the material was furnished (NCGS § 44A-27(b)).
  1. Notice of Public Subcontract (NCGC § 44A-27): Additionally, claims may not include labor or materials provided more than 75 days prior to the claimant’s service by certified mail or by signature confirmation as provided by the U.S. Postal Service (NCGS § 44A-27(c)) of the claimant’s written Notice of Public Subcontract to the contractor (NCGS § 44A-27(b)), unless claim is less than $20,000 (NCGS § 44A-27(e)); otherwise claim is limited to value of labor and material furnished within 75 days of the service of the Notice of Public Contract, or $20,000; whichever is greater (NCGS § 44A-27(b) – (e)).
  1. Contractor Project Statement (NCGS § 44A-27): Contractors must provide their subcontractors with a Project Statement that includes certain minimum information about the project, the contracting body, the payment bond and the surety (NCGS § 44A-27(f)(1)). Lower tiers must in term provide the Project Statement information to those of lower tier (NCGS § 44A-27(f)(2)). Subcontract agreements are not enforceable against lower tiers until the Project Statement has been provided to the lower tier (NCGS § 44A-27(f)(3)).
  1. Payment Bond Copies (NCGS § 44A-27 and -31): Contractors must provide copies of payment bonds if requested within 7 calendar days after receipt of the request (NCGS § 44A-27(b)). Additionally, public bodies shall furnish certified copies of payment bonds upon 10 days’ notice and request (but may require reasonable payment for the actual cost of furnishing the certified copy) (NCGS § 44A-31).
  1. Attorney’s Fees (NCGS § 44A-35): The prevailing party to a public bond action may be awarded its reasonable attorneys’ fees by the presiding judge in addition to other relief awarded (NCGS § 44A-35).

Copyright 2015, Vandeventer Black LLP. Lien rights involve complex legal requirements. This summary of North Carolina mechanic’s lien laws is for general informational purposes and is not intended as specific legal advice.
1 Neil Lowenstein is licensed in North Carolina, as well as Virginia and the District of Columbia. Neil chairs Vandeventer Black’s Construction and Government Contracts Practice Group.

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Industry Opposes Senator McCain’s Jones Act Repeal Rider to Keystone Pipeline Bill

Authored by attorney Daniel R. Weckstein, Esq.

Last week, Senator John McCain (R-Arizona) offered an amendment to the already controversial Keystone Pipeline Bill.  His amendment would repeal the Jones Act and its protections for the American shipbuilding and maritime industry.  Under the Jones Act, vessels used for coastwise trade in the United States must be constructed and repaired in American shipyards.  If the Jones Act was repealed, such vessels could be constructed and repaired in foreign shipyards, many of which are subsidized by foreign governments.

Not surprising, this proposal by Senator McCain has raised a storm of protests from American shipyards, American industry groups, maritime unions, pro-defense organizations and even local Hampton Roads groups.  Among those submitting strong protests to the Amendment’s proposed repeal of the Jones Act are the American Maritime Partnership, the Navy League, the Shipbuilder’s Council of American, the International Propeller Club and even our own locally-based Virginia Ship Repair Association (VSRA).  These groups are all united in their belief that the senator’s proposal will severely hamper, and perhaps cripple, the American maritime industry and harm America’s stature as a maritime or seafaring nation.  For example, the Navy league stated that it “opposes the McCain Amendment (amendment #2) to S.1, which would gut the U.S. shipbuilding industry by striking the U.S. build requirement provisions of the Jones Act.”

This strong reaction arises from several areas of concern with the proposed repeal.  First, without the Jones Act, there is a real concern that American shipbuilding and ship repair will suffer dramatic losses of capacity.  Because construction and repairs can be cheaper at foreign subsidized industrial facilities, the ship building business and repair business could shift to foreign countries.  As that work moves overseas, American shipyards will be forced to downsize and perhaps consolidate or close.  This loss of capacity could in turn cripple the American industrial base and result in the loss of tens of thousands of jobs.  Such capacity is not something easily recovered in times of war or national emergency, and once ship building capacity is lost, it will probably never return.  Once the skills of the shipbuilder workers are lost, it could take decades to rebuild them if, in fact, they could be recovered. The ability to perform quick repairs or new construction from local yards would also be gone.  Bill Crow, the President of the Virginia Ship Repair Association that represents 254 member companies and over 40,000 Virginia workers notes that “The amendment that Senator McCain introduced would be irreversibly catastrophic to Virginia’s ship repair and shipbuilding industrial base.”

Moreover, there is a potentially devastating “ripple effect” to the loss of these jobs.  Less American made ships means less American maritime companies and less American crews.  Many small businesses work in the ship building and repair industries to support such construction, and these interests would also be harmed.  Shipyards also use tools and heavy equipment potentially supplied by other American companies.  Additionally, large ship building and repair companies also have the capacity to perform work in related maritime industries such as the offshore wind electrical projects we are now seeing and in other non-maritime, industrial and infrastructure repair projects (for example, bridges and heavy industrial projects).  The loss of the bulk of these shipyards’ core businesses would greatly impact their ability to provide cost effective work in other non-maritime industries, and this in turn could have damaging effects throughout other American industries.

In addition to the loss of jobs and industrial base, there are also very real national security issues.  If our ships are built or repaired in foreign ports, then we become dependent upon such foreign countries.  Again, in times of national emergency, we may not be able to rely upon such shipyards, particularly those located in countries such as South Korea that are potentially vulnerable to  global conflicts.

Because our Navy, Marine Corps and Coast Guard vessels are also built and repaired in the same American shipyards, the loss of the commercial work would lower these yards’ volume, resulting in higher prices for the work performed for our armed forces.  With our shrinking Navy and military budget, higher prices could harm our national defense efforts and could further increase the national debt.  If the cost per military ship rises with the loss of commercial work to absorb a yard’s overhead, not only do we as a country suffer economic losses, but this potentially results in an even smaller Navy with even less ability to respond to international crisis  and domestic security needs.

Moreover, the American merchant marine fleet, which under the Jones Act operates the coastwise American trade, is also protected by the Jones Act.  The loss of such ships, and potentially such sailors, could severely impact our national defense.  During times of war, such American made and crewed ships are available for use in military or supply operations.  With the McCain Amendment’s potential repeal of the Jones Act, such assets might be lost to the American military and defense strategy.

For all of these reasons, the proposed amendment to the Keystone Pipeline bill which would result in the repeal of the Jones Act is a very bad thing for America in general, and repeal of the Jones Act could severely harm the Hampton Roads and Virginia maritime industry.

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