A POTENTIAL LIEN TRAP

Lien law is convoluted and complicated, and often does not fulfill the constitutional requirement (in the North Carolina Constitution) that the General Assembly provide for an “adequate lien” (Article X, Section 3). Such is the case when a husband and wife decide to improve real property. It is incumbent upon their contractors, subcontractors and vendors to ask some questions and protect themselves.

Protect themselves from what?

In North Carolina, a married couple generally owns real property by “tenants by the entireties,” which roughly translates to each owns the real property entirely. By way of example, if one spouse is wont to run up significant debt in his/her own name such that a creditor gets a judgment against them, the real property is protected from the judgment lien unless both spouses are named.

In terms of construction liens, this can be a problem for a party seeking to file a lien on real property improved unless both spouses committed to the underlying construction contract. In our office, we see this where one spouse opens an account or executes a contract for either an improvement or to build a house, then fails to pay. Instinct says that a mechanic’s lien pursuant to North Carolina General Statute 44A is appropriate. However, case law says, “not so fast, my friend” unless you have both spouse’s signature. There is no presumption that both agreed to incur the debt. Beware.