Defeat of Proposed Mechanic’s Lien Legislation a Big Win for Commercial Real Estate

In a meeting that lasted less than 10 minutes, a legislative study committee in Raleigh today voted unanimously to shelve a pair of bills that would have allowed a mechanic’s lien on the owner of a leasehold interest to be extended to the fee interest of the property owner.

The committee action is a BIG WIN for commercial property owners around the state, who would have faced significantly greater liability for unauthorized improvements made by tenants. The proposed legislation was strongly opposed by REBIC, the North Carolina Association of REALTORS® (NCAR), the Charlotte Regional Commercial Board of REALTORS®, and the Charlotte Chapter of NAIOP.

Current law allows contractors to place a lien on a leasehold interest when a tenant fails to pay for the goods or services for which they contracted. The lien can be extended to the property owner or landlord only if the owner or landlord contracted with the provider for the work performed.

Representatives of the associations for electrical, plumbing and mechanical contractors had proposed that improvements authorized by a tenant should be automatically presumed to be authorized by the property owner. This conflicted with a longstanding N.C. Supreme Court ruling, which states that it is the contractor’s duty to exercise due diligence in determining whether they are contracting with a tenant or property owner.

Thanks to everyone who helped defeat this terrible legislation, particularly Cady Thomas and Robert Broome at NCAR! Thanks also to State Representative Dean Arp, who co-chaired the Study Committee and made the motion to shelve the proposed bills.

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