Building Codes in the Sky with Diamonds

Attr: Paraphone Music Sweden [CC BY 3.0 (]

Gregory L. Shelton

Shelton Law Carolinas

Picture yourself in a shack by the river
With newspaper curtains . . .
roof open to skies
Somebody’s knocking, you answer quite slowly
A man with demolishing eyes

Good Morning, Good Morning

It’s Friday morning at nine o’clock, and you’re still padding about in your ventilated bathrobe, clutching your coffee and perusing the local section of the newspaper. “Four thousand potholes in town? Hmm. I wonder who counted them all.”

Your quiet morning is interrupted by a man from code enforcement. His name is Mr. Maxwell, and he informs you that he wants to bulldoze your home. “Look, Maxwell,” you protest. “Just yesterday I was doing the garden and digging the weeds. Who could ask for more?”

“The county believes this structure is not safe,” Maxwell replies. “You’ve got a hole in the roof where the rain gets in. You have an infestation of Norwegian wood beetles eating through the walls. And I just saw a raccoon coming in through the bathroom window.”

Maxwell tries to hand you an official looking document, but you refuse to accept it. “Chasing paper leads me nowhere,” you tell him. He leaves it in a jar by the door and bids you a good day.

Curiosity eventually wins out. There will be a hearing in ten days to determine whether your house will be demolished.

“How could they do this to me?” you wonder.

You need help. And not just from anybody. You need a guru. An expert-textpert who can help you fend off Maxwell’s sledgehammers.

You ring your solicitor. He listens intently as you tell your story. “Hmm. I see. What’s that? You say you’ll change the constitution?” he asks. “Well, you know . . . states have an inherent right under the Tenth Amendment to enact and enforce laws to protect the health, safety, welfare, and morals of the community. This is known as the state police power.”

The solicitor continues: “A state may delegate its police power to local jurisdictions, such as counties, cities, and towns. Whether and how much authority is delegated varies from state to state. The code enforcement agency to whom the power is delegated may require an owner to repair a structure or even demolish it, provided of course the agency properly interprets the building code and does not violate the owner’s statutory and constitutional rights.”

Mean Mr. Maxwell wants to bulldoze your house, and this lawyer has his head in a cloud. You’ve had enough. You tell him that you can’t sleep, that you can’t stop your brain, and that you’re going insane. “I’ll give you everything I’ve got for a little peace of mind,” you say in desperation.

“No need for that,” the lawyer tells you. “But I do charge by the hour. Now, is your house on the North or South Carolina side of the river?”

“Both sides” you tell him. [Cue sitar music]

South Carolina: Everything Was Right

On the South Carolina side of the river, a splendid time is guaranteed for all.

Let me introduce to you, the one and only police power: “The public policy of South Carolina is to maintain reasonable standards of construction in buildings and other structures in the State consistent with the public health, safety, and welfare of its citizens.” S.C. Code of Laws § 6-9-5. The South Carolina Building Codes Council, a state agency, adopts the building codes to be enforced. Municipalities and counties then enforce the building codes. S.C. Code of Laws § 6-9-10(A); S.C. Code Regs. 8-105; Int’l Bldg. Code §§ 104.2, 104.3.

South Carolina’s streamlined approach to building code enforcement minimizes disputes about procedure and process. However, building code issues do appear from time to time in South Carolina’s law books. Just last year, the Supreme Court of South Carolina addressed the building code in a case called Donevant v. Town of Surfside Beach, 422 S.C. 264 (2018).

In Donevant, the town’s building official issued a stop work order on work being performed without a permit. The town fired the building official for issuing the stop work order. The building official, in turn, sued the town for wrongful termination. The town defended by arguing that the building official was an at-will employee. The court rejected this argument, stating that “it is a violation of a clear mandate of public policy to fire a building official for enforcing the building code.”

Although Donevant deals primarily with the public policy exception to the at-will employment doctrine, it is a good place to start if you want to learn more about the building code in South Carolina. The court introduces the reader to the Building Codes Council, and then walks the reader through the applicable statutes, administrative codes, and even applicable provisions of the International Building Code.

North Carolina: Helter Skelter

Meanwhile, on the North Carolina side of the river, things are very strange.

Richard Ducker’s two-part series on code enforcement and nuisance abatement in the Coates’ Canons blog is aptly titled “What a Mess.” But don’t take his word for it. Let’s climb in the back of a newspaper taxi and take a little trip to Building Code Land.

[Think this part in animation]

Above you in the marmalade skies, you see a flock of law books, covers and pages flapping, screaming like psychedelic seagulls. There are chapters on the police power, chapters on cities, chapters on counties, chapters on state agencies, chapters on administrative appeals. So many chapters. So many pages. See how they fly.

And suddenly . . . they’re gone!

The International Building Code then appears from behind a row of bent backed tulips.

Measurements, calculations, earthquakes, and walls
ramps, sprinklers, voltage, and stalls

Chaotic yet precise, ambiguous yet technical
Building code books are imminently collectible


How we hate to see them go.

But now it’s time to relax and float downstream, to a little hideaway beneath the waves. Here in the sea of green lurk local ordinances, interlocal enforcement agreements, UDOs, constitutions, and even a fireman with an hourglass. (Engineering and Codes is a division within the Office of State Fire Marshall, so that’s a hidden meaning right there.)

Ad hoc, ad loc and quid pro quo.

So little time, so much to know

Jeremy again

By all the sea nymphets, we’re losing power. Time to surface.

[Here comes the sun]

Next stop, ladies and gentlemen: Patterson v. City of Gastonia, 220 N.C. App. 233 (2012).

This opinion from the court of appeals addresses law-and-order topics like sovereign immunity, demolition, administrative hearings, statutory construction, due process, the housing code, and inverse condemnation. But things aren’t as western as they first appear. Beneath the surface, Patterson takes us on a transcendental journey through the building code appeal process. It’s a long and winding road that may lead to the door of the courthouse. Or department of insurance. Or local zoning board of adjustment. Chief building inspector. City council. Zoning board. Sun king. Goo goo g’joob.

There are also subversive messages hidden in the text of the court’s opinion. For example, the word “procedural” appears throughout. “Procedural” backwards is “la rude corp,” which is almost French for “the rough body.” And building code enforcement in North Carolina is a rough body of law to master.

Surrender to the Void

It would take me years to write a comprehensive book on North Carolina’s helter-skelter laws. I don’t want to be a paperback writer. Just remember this:

True wisdom comes from understanding how much you do not yet understand


I don’t know what’s going on back there, people, but my newspaper taxi appears to be on fire. It’s getting smoky in here. Tour’s over.

We Can Work It Out

Building code enforcement involves aspects of criminal law, construction law, constitutional law, tort law, administrative law, and municipal law. If you find yourself in times of trouble, don’t just sit around making nowhere plans. You have a fighting chance to save your restaurant, gas station, factory, hotel, condo, shed, beach house, or castle. But you’ve got to get help quickly or you may end up sleeping behind the shelter in the middle of the roundabout.

NC Law , , , , ,

The Danger of Groupthink in Litigation

The Danger of Groupthink in Litigation

By: Gregory L. Shelton

Horack, Talley, Pharr & Lowndes, P.A.

Inspired by the Orwell novel 1984, William H. White, Jr. coined the term “groupthink” to refer to rationalized conformity. Groupthink has been blamed for the Bay of Pigs debacle and the Challenger tragedy.

In the early 1970s, psychologist Irving Janis identified eight symptoms of groupthink and organized them into three types:

Type I: Overestimations of the group — its power and morality

  • Illusions of invulnerability creating excessive optimism and encouraging risk taking.
  • Unquestioned belief in the morality of the group, causing members to ignore the consequences of their actions.

Past experience or arrogance can lead the group to believe that failure is simply not possible. Military history is awash in examples of this symptom.

Regarding righteousness, litigators often hear statements like “jurors will be outraged when I tell them what happened” or “no court in the country would let them get away with this!” Guess what. There is a chance that the jurors be bored when you reveal your bombshell at 4:15 p.m. on Friday afternoon; and that horrible thing the defendant did to you may be allowed in the contract you signed.

Type II: Closed-mindedness

  • Rationalizing warnings that might challenge the group’s assumptions.
  • Stereotyping those who are opposed to the group as weak, evil, biased, spiteful, impotent, or stupid.

We are right. Therefore, those who oppose us are ignorant and evil. Sound familiar?

An exhausting day of mediation with a good mediator is the best cure for close-mindedness. Mediation allows the parties to discuss the dispute across the table with a mediator raising questions that one side of the dispute previously ignored or dismissed when they were raised by the enemy.

Type III: Pressures toward uniformity

  • Self-censorship of ideas that deviate from the apparent group consensus.
  • Illusions of unanimity among group members, silence is viewed as agreement.
  • Direct pressure to conform placed on any member who questions the group, couched in terms of “disloyalty”
  • Mindguards— self-appointed members who shield the group from dissenting information.

These symptoms, which are common in litigation, usually occur when: (1) the attorney spends 100% of the time as advocate and 0% of the time as counselor (the “bulldog”), or (2) when the client attacks his or her lawyer for identifying risks or problems with the case.

The client may ask the lawyer something like, “whose side are you on?” Sophisticated or institutional clients who have been through litigation usually do not ask questions like this. When asked this question, the lawyer must explain the difference between the lawyer’s private role as counselor and the lawyer’s public role as advocate.

Take Away

It is not enough to recognize symptoms of groupthink. Litigators and clients should take affirmative steps to prevent groupthink from corrupting the decision-making process. Otherwise, the consensus of a cohesive, self-righteous group of brilliant intellectuals may be to steer the ship straight into the rocks.


Government Contracts, NC Law, SC Law , , , , , ,

Beware the Credit Card Millionaire



Beware the Credit Card Millionaire

By: Gregory L. Shelton
Horack, Talley, Pharr & Lowndes, P.A.

Con men come in all shapes and sizes. From the elegant mountebank hawking Dr. Feelgood’s magic hair elixir to the foreign prince who must deposit “$$ 50 Million US” by Tuesday, a con man succeeds by gaining the confidence of his mark. Today we examine an abundant subspecies of con man that I call the credit card millionaire (CCM).

We are told to surround ourselves with successful people. Winners.

The cologne-scented magazines tell us that successful people wear expensive Swiss watches and drive big German sedans. The CCM exploits these messages to run his confidence game.

The CCM syllogism:

Successful people wear Rolexes.

I wear a Rolex.

Therefore, I am successful.

The CCM leases the car and buys the watch on credit, but to him these trinkets are more than tools of the trade. The CCM believes that he is entitled to live like a king even though he produces nothing of value. He is not stealing or freeloading. He is simply getting what he deserves; what the world owes him for his greatness.

His hair will be highlighted.  He doesn’t wear socks. He went deep sea fishing on Tuesday. He is too rich to wear long pants to your office. He may be wrapped in gold chains and bracelets.

The CCM will have great opportunities, too. Right now, he’s negotiating a huge deal to develop twelve stand-alone restaurants in the Carolinas, and he wants you to be the general contractor.   But he is not afraid to take you to task if you can’t keep up with his hustle and bustle. Remember, he’s successful. He deserves a top notch product. He’s in the fast lane. Now. Now. Now.

Of course, none of this is real. The CCM is mimicking a successful person in order to latch on to his host (that’d be you) to extract goods and services. Biologists refer to this behavior as aggressive mimicry, where parasites or predators share signals with harmless species allowing the mimic to avoid identification by their host or prey. The CCM thus shares much in common with the humpback anglerfish, the assassin bug, and the leucochloridium genus of flatworm.

By The original uploader was Elapied at French Wikipedia, Public Domain,

Government Contracts, NC Law, SC Law

Keep the Hate Mail Coming

You Supply the Paint, I'll Paint Your Portrait

You Supply the Paint, I’ll Paint Your Portrait

Keep the Hate Mail Coming



By: Gregory L. Shelton
Horack, Talley, Pharr and Lowndes, P.A.


In business litigation, winners and losers often are decided by the documents, whether it be a single email, a series of memos, or hundreds of letters. It stands to reason, then, that the things people write to each other will probably affect the outcome of the case.

For the trial lawyer, simply reading the documents to the judge, jury, or arbitrator is not enough. The lawyer must use the documents to portray the landscape, the mood, the scenes, and the characters of the case. Some situations require delicate, subtle brush strokes, while other situations require an aggressive dose of expressionism.

Bob Ross’ go-to colors included Titanium White, Phthalo Blue, and Yellow Ochre. In testy lawsuits, the palette can include Nasty Green, Purple Anger, Vicious Red, Bossy Blue, Calculating Grey, and Irrational Sienna.

Written outbursts and bluster directed at the opponent offer temporary relief to the sender, but in most cases are self-destructive acts.


“I will seek punitive damages and pursue criminal charges.”

“You’re the worst architect I’ve ever seen and I’ve told everyone I can how you destroyed this project through your incompetence.”

The recipient should view these tantrums as more paint on his palette. This is easier said than done, of course . . . . The troublesome biology of fight or flight and all that.

When you receive an unprofessional letter or email, overcome your base instincts. Take a breath, count to three, and quietly thank the sender as you exhale.

Attr: Andrea di Bonaiuto, Cappellone degli Spagnoli (WikiCommons)


Government Contracts, NC Law, SC Law

Litigating Complex Construction Disputes

Litigating Complex Construction Disputes


What do you want the judge or jury to see?




By: Gregory L. Shelton

Horack, Talley, Pharr & Lowndes, P.A.

For construction lawyers, there are cases, and then there are cases.  Defending a general contractor being attacked from the top by an owner, from the side by the architect, and from below by the subcontractors and suppliers on an office tower project. Championing a condominium owners’ association facing many millions of dollars in repair costs caused by defective construction. Roads, hotels, stadiums, tunnels, factories, power plants . . . .

The stakes are high, the issues complex, and the lawyer is surrounded by dragons that need slaying. It is easy to become overwhelmed by the volume of letters, phone calls, emails, pleadings, discovery requests, and strategic decisions that must be made quickly. Assigning an army of lawyers to a case will only go so far. Yes, Fortune 500 companies can turn over every leaf, review every document, and interview every witness, along with his or her barber or hairdresser. Knowing the facts is critical, of course.

But facts about what?  Which events? Which issues? Which witnesses? If the case is going to trial, the lawyer must whittle down ten million potentially relevant documents stored in the hard drives, bankers boxes, and filing cabinets of the parties to three hundred for the jury.

Technology has improved over the years, making document review and case management much more efficient. When I started practicing law, reviewing documents could mean a trip to Chicago, or to the project site, or to the opposing attorneys’ office, or to a warehouse off Highway 17, or to a spider-infested tool shed in the swamp to rummage through stacks of boxes. Today, document review means logging on to a computer and running search queries. Easier, but not nearly as exciting or dangerous.

While technology has made us more efficient, lawyers must still know the fundamentals. Complex litigation requires the lawyer to set up a good data tracking and collection system, a clear delineation of responsibility among the team members, and systems to deal with the volume of discovery requests, letters, and other incoming and outgoing paper.

But above all, the lawyer must decide what he wants the jury to know about his client’s case. The lawyer will not dump hundreds of documents in the jurors’ laps for the jury to sort out. The lawyer will not utter the words “subsequent to,” “had occasion to,” or “exited the facility.” Instead, the lawyer will tell the jury what they are about to see. “In this case, you will see how a bad survey cost ABC Contracting millions of dollars, and you will see how the project owner tried to cover up the surveyor’s mistake and leave ABC holding the bag.” Once the lawyer decides on his theme of the case, the lawyer can truly put the important documents, testimony, photographs, and other evidence to work for his client.

And that, Charlie Brown, is the art of litigating a complex construction case.

Photo of Fantasy City attr. Kimon Berlin, WikiCommons



Government Contracts, NC Law, SC Law , , , , , , ,

Employees, Independent Contractors, and The Mythical “1099 Employee”

16th c. depiction of mythical 1099 Employee

1099 Employee Depicted in 16th c. Triptych “The Garden of Earthly Delights” by Hieronymus Bosch

Employees, Independent Contractors, and the Mythical “1099 Employee”


By: Gregory L. Shelton
Horack, Talley, Pharr & Lowndes, P.A.


I too have heard the whispers of strange creatures called “1099 Employees” that roam abroad. But before you run off to Oregon with night vision goggles and a duck call, understand that the term “1099” refers to Form 1099-MISC, an IRS form used to report “nonemployee compensation” and other miscellaneous income. Employee wages and withholding, on the other hand, are reported on the W-2 form.

We could debate the metaphysical aspects of “1099 employees,” but let’s just skip ahead to the part where I tell you that “1099 employees” do not exist. The term is an oxymoron, like “deafening silence” or “forward retreat.”

What fun is a world without some mystery and danger, you ask? Fret not. The law offers plenty of mystery and danger when it comes to deciding whether to treat a worker as an employee or an independent contractor.

I.      The Employee/Independent Contractor Distinction

Classifying a worker as an independent contractor eliminates significant costs and administrative burdens for construction companies. Companies don’t pay or administer an independent contractor’s social security taxes, overtime, health insurance benefits, workers compensation insurance, unemployment insurance, and other costs. The company also avoids potential liability under employment discrimination laws. In general terms, independent contractors can thus be viewed as subcontractors.

Simply declaring a worker an independent contractor, however, will not make it so. The law imposes a duty on the company to properly classify the worker’s status; in the same way the law imposes a duty on the taxpayer to properly report income.

The construction industry is particularly susceptible to misclassifying employees as independent contractors. The industry is nomadic and seasonal in nature, involves greater potential for on-the-job injuries, and relies heavily upon subcontractors and journeymen laborers to perform the work. To add to the temptation, the time and administrative overhead necessary to comply with employment laws, tax laws, and regulations can be overwhelming to smaller companies. This is particularly true in the stop-and-go MGB economy of recent years.

II.    Our Employees Independent Contractors Are Our Greatest Asset!

I’ve observed three general categories of construction companies that misclassify workers:

  • Companies that innocently, or perhaps naïvely, believe that worker classification is a matter of private contract between the company and the worker.
  • Companies whose workers straddle the line between employee and independent contractor (“close calls”).
  • Companies that understand the law but decide that the financial benefit of treating an employee as an independent contractor outweighs the risk of getting caught.

What constitutes an “employee” is often in the eye of the beholder (meaning in this case a judge or jury). Courts and government agencies have developed legal tests as guidance. The IRS takes into account twenty factors to decide status, whereas the DOL applies the “economic realities” test derived from a decision by the United States Supreme Court. State courts use their own “common law” tests developed through court precedent. For example, South Carolina courts follow the Yellow Cab test, named after a state court case involving a cab driver’s relationship to the cab company.

Although other factors are considered, the issue of control over the worker plays a critical role in the tests. For instance, under South Carolina’s Yellow Cab decision, “[t]he test for determining whether a relationship between parties is that of employer and employee, or that of employer and independent contractor, is whether the party for whom the work is being done has the right to control the worker with respect to the manner or method of doing work, as distinguished from the right merely to require certain definite results conforming to the contract.” Other factors considered by courts and agencies include training, integration, work hours, duration of relationship, payment of travel expenses, furnishing of tools, and availability of the worker’s services to the public.

Courts examine classifications on a case-by-case basis, focusing on the specific facts and circumstances at issue in the case. For close calls, companies should seek guidance from legal counsel before classifying a worker as an independent contractor.

III.   The Enforcers  

The government agencies with power to punish a “misclassifer” (my term) include the Internal Revenue Service, Department of Revenue, Department of Labor, Occupational Safety and Health Administration, Equal Employment Opportunity Commission, and Immigration and Customs Enforcement. CGL carriers may also take an interest in worker classification.

A company charged with or sued for misclassifying a worker can face financial penalties including unpaid withholdings, unpaid employment insurance taxes, unpaid overtime, private lawsuits for damages, assessment of attorneys’ fees, and other unpleasant consequences depending upon the issues involved.

IV.    To W-2 or Not to W-2 . . .

A company’s choice of tax form is not the last word on the worker’s classification as employee or independent contractor. If an employee is misclassified as an independent contractor, expect government agencies, insurance companies, plaintiffs’ lawyers and employment lawyers to scrutinize a worker’s true relationship to your company. Courts and government agencies have developed several legal tests to decide whether a worker is an employee or independent contractor. A company found to have misclassified an employee as an independent contractor faces financial penalties, damages, and legal expenses.


Attr. Hieronymus Bosch, The Garden of Earthly Delights, 1504

Government Contracts, NC Law, SC Law , , , , ,

Twenty-Year Express Warranty Survives Six-Year Statute of Repose

Something's Gotta Give

Something’s Gotta Give

When Principles Collide: North Carolina Supreme Courts Holds that Twenty-Year Written Warranty Survives the Six-Year Statute of Repose

By: Gregory L. Shelton

Horack, Talley, Pharr & Lowndes, P.A.




When irreconcilable legal principles collide, the highest court in the land will have the last word. In Christie v. Hartley Construction, Inc., the Supreme Court of North Carolina had to decide what happens when North Carolina’s six (6) year statutory time limit on claims–or statute of repose–collides with the freedom of parties to make contractual promises as they see fit.

I.   Background

In the Christie case, homeowners sued the manufacturer of an exterior stucco-like material under the manufacturer’s express (written) twenty-year warranty. The manufacturer acknowledged its written twenty-year warranty, but asked the court to dismiss the warranty claim because the homeowners did not file the lawsuit within the six-year statute of repose applicable to construction cases. The homeowners, in turn, argued that the manufacturer relinquished any claim to the statute of repose defense when it promised to warrant the product for twenty years.

This seemingly run-of-the-mill construction case actually makes the “top five” most important construction cases in 2014 because of the legal principles at stake. The supreme court summarized the dispute as “a conflict between the public policy embodied in the repose period set out in N.C.G.S. § 1-50(a)(5) and the right of parties to contract freely.”

II.   The Competing Principles

In the red corner, we have the “statute of repose,” which functions as an “unyielding and absolute barrier” to untimely legal claims. The six year statute of repose starts to run at project completion, even if the plaintiff is unaware of the defects. If a lawsuit is not filed within six years from completion, the plaintiff simply has no claim against a builder or developer. Statutes of repose serve the policy function of putting time limits on potential claims so that industry participants can evaluate potential liability exposure in a meaningful way.

In the blue corner, we have the legal principle of “freedom to contract.” This principle provides that courts will not act paternalistically when interpreting a contract that two parties have entered. For example, courts will not judicially rewrite (“blue pencil”) contracts to make the terms more understandable or fair. Instead, courts favor the policy of allowing the parties to contract freely as they deem appropriate.

Two legal principles in direct opposition . . .

The unstoppable force colliding with the immovable object . . .

And there could only be one winner.

III.  And the winner is . . .

In a unanimous decision, the supreme court declared “freedom to contract” as the winner:

“[W]e conclude that the six-year statute of repose set out in the statute provides valuable protection to those who make improvements to real property, but that the beneficiaries of the statute of repose may choose to forego that protection without violating any rule of public policy.”

In layman’s terms, a manufacturer that chooses to stand behind its product for twenty years should be allowed to do so. The supreme court looked at the problem from the customer’s point of view as well: “A warranty that a seller knows is unenforceable is a sham,” observed the court, “useful only to beguile the unsuspecting.”

IV.   Conclusion

The Christie case makes the “top five” list of most important construction law cases because the statute of repose has been heavily litigated over the past few years as damage from defective work in the building boom has started to surface.

The case is equally important to the builders and manufacturers out there. The lesson: Don’t make promises you don’t intend to keep.

NC Law , , , , , ,

Condominium Defects in the Carolinas

Condominium Defects in the Carolinas800px-Block_65_on_Hashima_Island


By: Gregory L. Shelton
Horack, Talley, Pharr & Lowndes, P.A.


Water Will Find A Way

Condominium owners associations (COAs) are usually responsible for maintaining and repairing roofs, exterior walls, and other building envelope components. If the building envelope has not been designed or constructed properly, water will find its way into the building and attack the structure itself. The resulting decay, hidden between the exterior and interior walls, may go undetected for years.

Modern condominium buildings are particularly susceptible to water intrusion. Condominiums have become more complicated to satisfy the aesthetic demands of the market. More corners, terminations, railings, and roof lines mean more potential entry points for water. If the construction workers who install the sheathing, building wrap, windows, flashing, and masonry are not properly trained, or fail to follow the manufacturer’s instructions to the letter, water may become trapped inside the building envelope with nowhere to go. And if the developer is singularly focused on selling units, and views construction as an opportunity to reduce costs, then the fox truly is watching the hen-house. The fox knows he won’t be hanging around for long.

Tick Tock, Part I: The Statute of Limitations

COAs should not automatically assume that the architect, developer, contractor, or subcontractors will be held accountable for their acts of negligence. Under South Carolina law, the statute of limitations for construction defects is either two or three years, depending on the nature of the claim. The clock starts running when the COA discovered or reasonably should have discovered the defect. In North Carolina, the limitations period is three years, but the clock cannot start to run until the developer turns over control of the COA to the unit owners.

When the statute of limitations starts to run is often disputed in court. I once litigated a case where the COA discovered water intrusion in the clubhouse after a resident tripped and fell through the drywall. A gust of warm moldy air filled the room. Upon further inspection, the COA discovered damage to the structure itself and took immediate action.

Tick Tock, Part II: The Statute of Repose

Unlike the statute of limitations, the statute of repose starts to run at project completion. In North Carolina, the statute of repose is six years from completion. In South Carolina, the statute of repose is either eight or thirteen years from completion. The statute of repose runs without regard to the COA’s discovery of the defect. If the plaintiff proves that the damage results from willful or wanton conduct, the statute of repose will not apply to bar the claim.

Out of Sight + Out of Mind = Out of Money

COAs ignore construction defects at their own peril. The costs to repair structural damage, replace the building envelope, and remove mold can easily run into the millions of dollars. If the COA fails to recover costs from the negligent parties, the unit owners will ultimately bear the costs. COAs should consider hiring a consultant to inspect the building envelope and other components of the building. If negligence is found, the COA should immediately consult a lawyer to decide the next step.

Photo courtesy of Wikicommons (Attrib. Jordy Meow)


NC Law, SC Law , , , , , , ,

The Lien Agent: What the Subcontractor Needs to Know

Labyrinth, Boulogne-sur-mer

Labyrinth, Boulogne-sur-mer

The Lien Agent: What the Subcontractor Needs to Know



By: Gregory L. Shelton
Horack, Talley, Pharr & Lowndes, P.A.

North Carolina’s new lien agent law takes effect on April 1, 2013. Having already covered what the owner needs to know, we now turn to the subcontractors and suppliers who will be present on the project site. (Suppliers not present on the project site will be covered in a later post.)

The lien agent provisions constitute a new layer of procedures under chapter 44A. Thus, the existing procedural steps and methods (notice of contract, notice of subcontract, notice of claim of lien upon funds, and claim of lien upon real property) should continue to be observed by everyone.

Step One:  Obtain contact information of lien agent

Beginning April 1, owners must designate a lien agent for most residential and commercial construction projects where the cost of the improvements equals or exceeds $30,000. If the owner follows the law, the identity and contact information of the lien agent will be located within the body of the building permit or on a sign posted conspicuously and continuously on the project.

If the owner has not posted contact information of the lien agent at the project site as required, you should send the owner a written request for the lien agent’s contact information. The owner is required to provide you with the lien agent’s contact information within seven (7) days of receiving your written request. The owner must provide you with the contact information using the same method that you used in making the request. For example, if you fax a request to the owner, the owner must fax the lien agent contact information to you.

Step Two: Serve your “Notice to Lien Agent” on the project’s lien agent

To fully protect your lien rights, you must send your “Notice to Lien Agent” to the lien agent chosen by the owner within 15 days of your first furnishing of labor or materals. If you forget or otherwise fail to send your “Notice to Lien Agent” within 15 days, don’t panic. Your lien rights will remain intact as long as you send your “Notice to Lien Agent” before the property is sold or refinanced. Think of the 15 day window as a safe harbor where your lien rights are protected even if the project is sold or refinanced before you give your Notice to Lien Agent. The 15 day safe harbor will be particularly helpful to trades who begin work at the tail end of the project.

A.   For projects where lien agent is designated through www.LiensNC.Com

In most cases, the owner will make things easy on itself and select the lien agent through, a website established by members of title insurance industry. This website is an efficient and relatively easy way for everyone to abide by the lien agent requirements.

If the owner has designated the lien agent through the lien agent website www.LiensNC.Com (site will go online on April 1, 2013), navigate to the “Notice to Lien Agent Link” and fill in the information requested. If your cell phone has a QR app, you can navigate directly to the project using the QR code on the lien agent information posted by the owner. If no QR code is posted, write down or take a photograph of the lien agent information, log on to, and provide your information.

You will want proof that you provided your “Notice to Lien Agent” information on the website. Print out and save the receipt provided by the website.

B.   For projects where lien agent is not designated through the website

1. Preparation of Notice to Lien Agent form

If the owner has not obtained a lien agent through, you must send the “Notice to Lien Agent” to the lien agent by must include:

1.     Name, mailing address, telephone number, fax number  (if available), email address (if available), and website address (if available).

2.     Name of party with whom contracted.

3.    Description of the real property improved; and

4.     Notice of rights’ statement.

A form “Notice to Lien Agent” is available at my firm’s website by clicking here. (Users of this form are responsible for the accuracy and completeness of filings in accordance with article 2 of chapter 44A of the North Carolina General Statutes. Seek legal advice from a licensed attorney.)

2. Proper service (delivery) of Notice to Lien Agent form

Once you’ve prepared and signed the Notice to Lien Agent form, you must serve it on lien agent by one of the following methods of service:

  • Certified mail, return receipt requested
  • Signature confirmation as provided by US Postal Service
  • Physical delivery and obtaining a delivery receipt from the lien agent
  • Fax with fax confirmation page
  • Depositing with a designated delivery service such as FedEx, UPS, DHL
  • Electronic mail (email), with a delivery receipt

Each of these statutory methods of service contemplate that the subcontractor will obtain some form of proof of delivery, thus eliminating situations where the lien agent claims that it never received the “Notice to Lien Agent.”

Finally, if you submitted your information through, service on the lien agent is automatic. Thus, subcontractors using don’t have to type up and send a “Notice to Lien Agent” by the other methods listed above (mail, fax, UPS, etc.).

Step Three: Provide off-site lower tier subcontractor or supplier with lien agent contact information

General contractors and subcontractors often enter agreements with entities that will furnish labor or materials (usually materials) to the project but who will never step foot on the project site to see the building permit or lien agent contact information. To solve this conundrum, the new lien agent law requires the on-site contractor or subcontractor to provide its off-site lower tier suppliers written notice of the lien contact information within three business days of contracting with that lower tier. When possible or economically feasible, prudent suppliers should request the lien agent information when the purchase order is issued.

wikicommons photo attribution: Marianna




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The Lien Agent: What the Owner Needs to Know


Hedge Maze in Giverny

Hedge Maze in Giverny

The Lien Agent: What the Owner Needs to Know


By: Gregory L. Shelton
Horack, Talley, Pharr & Lowndes, P.A.

The new lien agent law takes effect on April 1, 2013.  This is the first of a series of posts designed to give construction industry participants in North Carolina a succinct step-by-step guide to the lien agent provisions.

The text, purpose, and history of the lien agent provisions have been discussed in great detail in Construction Law Carolinas and in other publications and blogs, so I won’t repeat that information here.

The lien agent provisions constitute a new layer of procedures under chapter 44A. Thus, the existing procedural steps and methods (notice of contract, notice of subcontract, notice of claim of lien upon funds, and claim of lien upon real property) should continue to be observed by everyone.

We start this series from the owner’s standpoint, because the owner is responsible for kicking off the lien agent process.

Step One: Determine whether you need a lien agent.

You are not required to appoint a lien agent if:

1.     The cost of the undertaking (project) is less than thirty thousand dollars        ($30,000) at the time the original building permit is issued;  or

2.     The owner is making improvements to an existing single-family residential dwelling unit that is used by the owner as a residence.

To reiterate, if either of these circumstances applies, you need not appoint a lien agent.

Step Two: Appoint a lien agent before contracting for the work.

If the exceptions set forth in Step One above do not apply, you are required to appoint a lien agent “no later than the time the owner first contracts with any person to improve the real property.” The lien agent requirement applies to residential and commercial construction projects. To appoint a lien agent, follow these simple steps:

1.     Visit and follow the prompts to log your project information.

2.     Select a lien agent from the list provided on the website. You are welcome to select any lien agent you want. If you aren’t sure which lien agent to select, keep in mind that all notices go to the same office in Raleigh and will be handled by the same staff.

3.     Post the building permit at the project site conspicuously (easy to find) and continuously during construction.

4.     If no building permit is required for the project, print the “Appointment of Lien Agent” form and post a copy of this document, which contains the contact information for the lien agent, on a sign conspicuously and continuously on the property from the beginning to the end of construction.

A preview of this process is available by visiting The site goes online on April 1, 2013.

In lieu of the straightforward and efficient website, you may appoint your lien agent using the time-consuming and tedious process of drafting a formal appointment of lien agent, visiting the North Carolina Department of Insurance website and identifying a lien agent, and transmitting the formal notice by certified mail, return receipt requested, signature confirmation through the US Postal Service, physical delivery with a delivery receipt from the lien agent, facsimile with facsimile confirmation, overnight courier such as UPS, FedEx, or DHL, or email with electronic delivery receipt.

Step Three: Respond to written requests for lien agent information

If you receive a written request by a potential lien claimant (contractor, subcontractor, supplier, design professional, etc.), you must:

1.     Provide notice to the potential lien claimant within seven (7) days of receipt.

2.     Written notice must contain the contact information for the lien agent, including:

  • name of lien agent;
  • physical and mailing address;
  • telephone number;
  • facsimile number; and
  • electronic mail address (website if applicable).

3.     Written notice must be sent to the potential lien claimant by the same delivery method used by the potential lien claimant in making the request. For example, if the potential lien claimant makes the request by personal delivery, you must personally deliver the lien agent information to the potential lien claimant.

Again, these lien agent provisions apply to residential and commercial projects alike. Talk of a carve out for commercial projects appears to have withered on the vine, at least for now. Finally, a bill (House Bill 180) containing technical amendments continues to work its way through the legislative process.

Step Four: Special Requirement Where Residential Contract with Contractor Contains Lien Agent Contact Information

When the lien agent is identified in a contract for a single-family residence, the owner is required to provide written notice to the lien agent containing the information that would be required in the contractor’s Notice to Lien Agent. The contractor will be deemed to have met its obligation to serve its Notice to Lien Agent. (In essence, the owner is required to serve the contractor’s Notice to Lien Agent by proxy.)

It bears repeating: This requirement only applies if the project consists of a single-family residence and the contract between the owner and contractor contains the lien agent contact information.

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