South Carolina Mechanic’s Lien and Bond Claim Rights – Here’s What You Should Know
Furnishing to a construction project in South Carolina? Today’s post is for you! We will review the statutory requirements for securing mechanic’s lien and bond claim rights for projects in South Carolina.
I Love South Carolina!
Each fall I take a trip to North Myrtle Beach with a side trip to Charleston and it is, hands down, the greatest week. And I’m not the only one that has a fondness for S.C., after all, there is a great deal of construction happening there! Unfortunately, with a lot of construction, payment issues are bound to creep in. Make sure you take the proper steps to secure your right to recover payment.
South Carolina is a Notice of Commencement State
On private and public projects, the prime contractor (or payment bond principal) may file and post a Notice of Project Commencement within 15 days from the commencement of work. If the prime contractor doesn’t file a Notice of Project Commencement, a Notice of Furnishing isn’t required.
Private Projects in South Carolina
Remedies available on private projects include mechanic’s liens and potentially a bond claim. Securing mechanic’s lien rights begins with serving a Notice of Furnishing upon the prime contractor as soon as possible. The lien, when later filed, will be limited to the amount owed by the prime contractor at the time the Notice of Furnishing was received.
As a best practice, you should always serve the Notice of Furnishing, even if it’s not required. When might a notice not be required? Your notice may not be required if you contracted directly with the owner or prime contractor, or, as stated above, if a notice of commencement was not recorded.
What information should be included in the Notice of Furnishing? Here’s the list, according to S.C. Code Ann. Sec. 29-5-20:
(1) the name of the sub-subcontractor or supplier who claims payment;
(2) the name of the person with whom the claimant contracted or by whom he was employed;
(3) a description of the labor, services, or materials furnished and the contract price or value thereof. Materials specially fabricated by a person other than the one giving notice and the contract price or value thereof shall be separately stated in the notice;
(4) a description of the project where labor, services, or materials were used sufficient for identification;
(5) the date when the first and the last item of labor or service or materials was actually furnished or scheduled to be furnished; and
(6) the amount claimed to be due, if any.
If necessary, you should file your lien and statement of account within 90 days from your last furnishing. In the event you remain unpaid, you must file suit to enforce the lien within 6 months from your last furnishing date. Miss the suit date? Lose your lien.
(A) Unless a suit for enforcing the lien is commenced and notice of pendency of the action is filed within six months after the person desiring to avail himself of it ceases to labor on or furnish labor or material for the building or structure, the lien must be dissolved. (S.C. Code Ann. Sec. 29-5-120)
Is the private project bonded? You should serve a Notice of Furnishing upon the principal of the bond as soon as possible. Then, much like the lien, the bond claim, when later filed, will be limited to the amount owed by the principal of the bond at the time the Notice of Furnishing was received.
You should serve your bond claim upon the principal of the bond within 90 days from your last furnishing. If the bond claim does not prompt payment, you should proceed with suit to enforce your bond claim after 90 days from your last furnishing, but within 1 year from last furnishing.
You can view statute in greater detail here: Private Bond Claim (S.C. Code Ann. Sec. 29-5-440)
Public Projects in South Carolina
Payment bonds protect claimants on public S.C. projects. Generally, the prime contractor is required to obtain a payment bond for public highway construction projects exceeding $10,000, government contracts exceeding $50,000, and state procurement contracts exceeding $100,000.
As a best practice, always attempt to obtain a copy of the payment bond!
Like private projects, a Notice of Furnishing should be served for public projects as soon as possible. The bond claim, when later served, will be limited to the amount owed by the principal of the bond at the time the Notice of Furnishing was received.
For those who remain unpaid, a bond claim should be served within 90 days from last furnishing, and suit to enforce the bond claim should be filed after 90 days from last furnishing, but within 1 year from last furnishing.
If you are furnishing to a public highway construction project, you should file suit to enforce your bond claim within 1 year from the date of final settlement. “No suit under this section shall be commenced after the expiration of one year after the date of the final settlement of the contract.” (Sec. 57-5-1660)
Retainage, Prompt Payment, Pay If Paid & Discharge Bonds
3.5% is the magic number on S.C. public projects. In accordance with statute, the amount of retainage to be withheld “must be no more than three and one-half percent” of a contract or subcontract for construction.
South Carolina’s statute does provide for prompt payment. The owner should remit payment within 21 days and the contractor should then pay its subcontractors within 7 days of receipt of payment from the owner.
“When a contractor or a subcontractor has performed in accordance with the provisions of his contract, the owner shall pay the contractor…within twenty-one days of receipt by the owner of any pay request based upon work completed or service provided under the contract, and the contractor shall pay to his subcontractor and each subcontractor shall pay to his subcontractor, within seven days of receipt by the contractor or subcontractor of each periodic or final payment…”
Pay if Paid clauses are a no-go in South Carolina, according to Sec. 29-6-230:
“The payment by the owner to the contractor or the payment by the contractor to another subcontractor or supplier is not, in either case, a condition precedent for payment to the construction subcontractor. Any agreement to the contrary is not enforceable.”
Lastly, Sec. 29-5-110 addresses discharging liens with the posting of a payment bond or other security.
“At any time after service and filing of the statement required under Section 29-5-90 the owner or any other person having an interest in or lien upon the property involved may secure the discharge of such property from such lien by filing … by cash or by a surety bond executed by a surety company licensed to do business in this State, and upon the filing … lien shall be discharged and the cash, securities or surety bond deposited shall take the place of the property upon which the lien existed and shall be subject to the lien.”