A guide to NC liens: What you need to know

What is a property lien?

A lien is a legal claim against a property that acts as security for a debt or obligation. It gives the creditor — whether a contractor, lender, or homeowners association (HOA) — a legal right to a portion of the property’s value if a financial obligation remains unpaid. In essence, it makes the property collateral until the debt is settled.

There are many types of liens, but in the context of community associations, the most common are assessment liens. These are typically filed by the HOA when they believe a homeowner has fallen behind on their dues or other financial obligations. It's important to note that liens don’t necessarily result in the immediate loss of a home, but they can restrict the owner’s ability to sell or refinance the property until the balance is resolved. In some cases, however, unresolved liens may escalate into foreclosure proceedings, especially if the debt remains unpaid for an extended period.

This article is not intended to and does not constitute legal advice or create an attorney-client relationship. Board members should consult their association’s attorney to discuss the legal implications of their decisions or actions prior to proceeding.
 

How do NC liens work?

The exact process varies based on the type of lien. For instance, an HOA-related lien may require following procedures outlined in the community’s governing documents and state statutes. Generally, the HOA must first provide notice to the homeowner regarding the unpaid balance and give them a chance to resolve the issue.

Specifically, the North Carolina Planned Community Act mandates that no fewer than 15 days before filing the lien, the HOA must mail a statement of the assessment amount due by first-class mail to the homeowner's physical address and the address of record with the association. This notice must also be sent to any other address for the homeowner shown on county tax records.

If the debt remains unpaid, the association may be permitted to file a claim of lien with the county clerk’s office in the county where the property is located.
Once recorded, the lien becomes public record and attaches to the property’s title. This can prevent the homeowner from selling or refinancing until the debt is resolved. Future buyers or lenders reviewing the title history will see this notice, so it’s not something a homeowner can easily disregard.

After recording the lien, the HOA is also required to notify the homeowner, typically through certified mail or another approved delivery method.
 

Types of liens in North Carolina

North Carolina law recognizes several types of liens, each with distinct rules and purposes:

• Voluntary liens: Agreed to by the property owner, such as a mortgage or deed of trust.
   
• Involuntary liens: Imposed without the owner’s consent, typically due to nonpayment (e.g., HOA liens, tax liens, or mechanic’s liens).
   
• Mechanic’s liens: Filed by contractors or suppliers who haven’t been paid for labor or materials. In North Carolina, a mechanic's lien must be filed within 120 days of the claimant's last furnishing of labor or materials. To enforce this lien, a lawsuit must then be initiated within 180 days of that same date.
   
• Judgment liens: Result from a court ruling in favor of a creditor and attach to the debtor’s property automatically upon filing. Judgment liens in North Carolina generally remain attached to a debtor’s property for 10 years and can be extended for another 10 years, though this is not automatic.

Understanding lien priority

When multiple liens exist on the same property, North Carolina follows a lien priority system to determine the order in which creditors are paid.

Property tax liens usually get paid before anything else, no matter when they were filed. After that, the mortgage (if there is one) usually comes next, since it was agreed to when the home was bought.

HOA liens generally fall somewhere in the middle. They’re not as high in priority as taxes or mortgages, but they often come ahead of things like judgment liens or credit card debt. Judgment liens, which are created when a creditor wins a lawsuit, are usually last in line. The specific priority depends on when each lien was recorded, relevant statutes, and the HOA’s declaration.

This matters most if a home goes into foreclosure or is sold to pay off debts. The money from the sale will be used to pay off liens in order of priority. If there isn’t enough money to pay them all, lower-priority liens might not be paid at all.
 

Legal rights and homeowner protections

North Carolina law grants important legal rights to both HOAs and homeowners when it comes to liens. HOAs may be entitled to recover reasonable attorney’s fees and interest on unpaid assessments, which helps them recoup the full costs of enforcement. Homeowners, on the other hand, have the right to dispute charges they believe are incorrect and may challenge a lien if it was filed improperly.
 

When are NC liens used?

NC liens are commonly used after repeated non-payment of monthly assessments. Failure to pay special assessments for major repairs or improvements can also lead to an HOA lien. However, liens are typically not the first step in the collections process. Most boards begin with a series of courtesy notices, payment reminders, and attempts to work out a resolution with the homeowner.
 

How to file a lien in North Carolina

Filing a lien in North Carolina can be technical, and anyone considering taking this step should consult an attorney, along with their property management company, for advice specific to their situation. However, the general steps may include:

1. Check eligibility: Confirm that your situation meets the criteria for filing a lien by consulting your governing documents, state law, local regulations, and a qualified attorney.
    
2. Collect documentation: Gather relevant materials, including evidence of the debt, copies of contracts or invoices, dates of nonpayment, and any communications showing attempts to resolve the issue.
    
3. Notice of delinquency: The homeowner must first be notified of the unpaid debt. This notice typically outlines the amount due, the date by which payment must be made, and the consequences of nonpayment.
    
4. Opportunity to cure: State law requires that the homeowner be given a reasonable period to resolve the balance before further action is taken.
    
5. Draft the lien claim: Prepare a lien form or document that states how much is owed, why it’s owed, and for what property the lien applies. Make sure to reference the correct statutes and follow local county requirements.
    
6. Record the lien: Take your completed form and supporting documents to the office of the Register of Deeds in the county where the property is located. Pay any required filing fee.
    
7. Serve notice: Deliver a copy of the recorded lien to the property owner. Service requirements can vary but typically involve certified mail or a personal delivery method consistent with state rules.

Can you avoid liens in North Carolina?

Yes, liens can sometimes be avoided. For homeowners experiencing financial difficulty, many boards are open to payment plans or temporary accommodations. The earlier a homeowner communicates their situation, the more options may be available.

For boards and community associations, it can be helpful to have a framework in place for partial payments, interim agreements, and flexible timelines — always in compliance with local laws. This level of clarity can minimize surprises and keep your community on better financial footing. While it doesn’t prevent every potential lien, it often helps property owners take corrective action before a legal claim must be recorded.
 

Removing liens in North Carolina

If a lien has already been filed, there are several ways to remove or dispute it in North Carolina:

• Settle the debt in full. The creditor is then generally required to release the lien.
   
• Negotiate a partial payment, if the creditor is willing.
   
• Challenge the lien in court, especially if there was fraud, improper procedure, or an invalid claim.
   
• Wait for the lien to expire — judgment liens, for example, last 10 years unless renewed.
   
• File for bankruptcy, which may discharge or strip certain liens depending on the situation.

The lien process can be complex and time-consuming. That’s where a trusted partner can make all the difference. FirstService Residential has more than 20 years of experiencing providing expert guidance to North Carolina HOA boards, helping them navigate collections, compliance, and communication with residents. If your board is looking for ways to streamline lien management or strengthen your association’s financial practices, contact us today.