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Lien Law Update: Lien Agent Statutes up for Proposed Revision

Thanks to Connie Wilson for the heads-up...

Senate Bill 602 was filed today.  The bill proposes to make the first significant revisions to the lien agent statutes since they were implemented five years ago.  The stated goal of the bill is to provide for the cancellation of notices to lien agent.

The proposal is positive in the sense that it is entirely permissive.  All of the amendments dealing with cancellation of a notice to lien agent provide that the potential lien claimant "may" deliver a cancellation, and there is no requirement that a potential lien claimant "must" do so.  (As a practitioner's note, the bill uses the term "file" inaccurately, since notices are not filed with the court, but rather are delivered to a title insurer / lien agent.)

However, the fact that the cancellation provisions are permissive does not mean the bill is perfect.  There is language in proposed section 44A-11.2(s) discussing the effect of a cancellation in the event a contractor delivers a subsequent notice.  Under the bill, the new notice "would not relate back to or renew the cancelled filing."  As it is, notices to lien agent automatically "relate back" to the beginning of a project provided there has not been a sale or refinancing of the property.  The same should be true for a new notice -- either the notice is timely with respect to a given sale or refinancing, or it is not.  So subsection (s) needs to clarify that it is in relation to such an event, rather than implying that the effect of a notice is somehow limited in time.

New proposed subsection (t) also suffers from loose language.  The new subsection would automatically cancel a notice after five years "if not cancelled or renewed pursuant to the procedures described in this section."  However, there is no provision for renewal of a notice under current law.  This would need to be cleaned up, or else a new provision for renewing notices will need to be added.

Finally, the bill provides for amending the permitted fee for a designation of lien agent from $25 to $30 for a residential (one- or two-family dwelling) project, and from $50 to $58 for any other project.  Given that the bill's stated intention is to allow for cancellation of notices to lien agent, the cost increase -- which will likely be passed along to the general public -- should be justified at a minimum. 

Watch this space for further developments regarding this bill.


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