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4. SOUTH CAROLINA

SOUTH CAROLINA

Tuesday, June 17, 2008

A person furnishing labor or material actually used in improving real property by agreement with or consent of owner shall have a lien on such property and on interest of owner up to amount due him in contract. South Carolina courts define "consent" to require a contract between mechanic and owner, before labor and material is furnished. Site preparation and security guards are considered labor performed.

Every laborer, mechanic or subcontractor of person furnishing material or labor for the improvement of real property authorized by owner has lien on property to value of labor or material furnished on contract price subject to existing liens of which he has actual or constructive notice. Subcontractor dealing with contractor has lien on funds remaining to be disbursed by owner and is entitled to payment in preference to contractor after notice to owner in writing of labor or material furnished.

Historically, general contractors who paid their subcontractors on a timely basis and in full in South Carolina faced the prospect of having liens filed against the project if the first-tier subcontractors failed to pay their own subcontractors and suppliers. Legislation enacted in 1992 is intended to eliminate this dilemma by allowing general contractors and second-tier subcontractors and suppliers to file public notices that will limit a general contractor's lien liability and at the same time protect a diligent supplier's or subcontractor's right to recover against the project under a lien.

To realize the benefits of the new legislation, the general contractor must give a "Notice of Project Commencement" within 15 days from commencing work. This notice must be filed with the Clerk of the Court of Common Pleas or the Register of Mesne Conveyances in the county or counties where the project is located, and must contain:

1. The name and address of the person filing the notice.
2. The name and address of the owner or developer of the project.
3. A general description of the improvement being construction.
4. The location of the project.

The general contractor also must post a notice at the project stating that "the contractor on the project has filed a Notice of Project Commencement at the county courthouse."

If the contractor properly and timely files the Notice of Project Commencement, the aggregate amount of liens which can be enforced on account of a subcontractor's non-payment to its own subcontractors and suppliers cannot exceed the amount of any remaining payments the general owes to the subcontractor. If, however, a second-tier subcontractor or supplier gives a "Notice of Intent to Lien" to the general contractor by certified or registered mail, any subsequent payments by the general contractor to the subcontractor will not reduce the amount recoverable from the general contractor by the person giving the Notice of Intent to Lien. Proper notice to the owner, if he can be found, is required within 90 days after completion or ceasing to provide labor and material. Lien attaches on recording date and is dissolved if suit to enforce lien is not commenced in six months after ceasing to provide labor and material.

The Notice of Intent to Lien must include:

1. The name of the claimant.
2. The name of the person with whom the claimant contracted or was employed.
3. A general description of the labor, services or materials furnished and their contract price or value.
4. A description of the project sufficient for identification.
5. The first and last dates on which materials, labor or services were provided or scheduled to be provided.
6. The amount due.

The Notice of Project Commencement and the Notice of Intent to Lien do not encumber or create any lien on the owner's project. Neither notice should delay, hinder or affect the owner's payment to the contractor.

The new legislation would allow a general contractor who has filed a Notice of Project Commencement, posted the required notice and received no Notice of Intent to Lien to pay a subcontractor in full without fearing that later liens could be enforced by an unpaid second-tier subcontractor or supplier to that subcontractor. If, however, the general contractor receives a Notice of Intent to Lien, he may implement safeguards to assure that the claimant is paid by the subcontractor. An additional benefit is that the general contractor now should know all persons who are supplying labor, materials or services to the project.