Friday, May 4, 2012

North Carolina Court Holds that Waivers Affect Mechanics Lien Rights

Be careful when signing waivers: they do exactly what they say they do: they can waive your rights to money and the right to file a mechanics lien. In Wachovia Bank v. Superior Construction Corporation the court found that a waiver submitted in connection with a progress payment waived rights to make North Carolina mechanics lien claims for the dollar amounts contained in the waiver.

Additionally, the court held that the waiver established "date of first furnishing of labor and/or materials." The date of first furnishing labor and/or materials is extremely significant under North Carolina's mechanics lien statute for purposes of establishing mechanics lien priority. With regard to that issue, the court found that the  "date of first furnishing" was reset to the date of the partial waiver.

This court decision is extremely important because it could affect the way projects are run. Contractors and subcontractors provide partial waivers of mechanics liens on projects because waivers are required to obtain payment.  Every standard form of agreement requires waivers to be provided before payment is issued. The court here provided that the waiver is not only for payments received, but also potentially for future payments: if a mechanics lienor loses priority, the ability of the lienor to collect could be significantly impaired. With that in mind, the ruling in this case will hopefully be appealed, and reversed so that the rights provided by a North Carolina construction liens are not abrogated.

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