Gallivan, White & Boyd Legal Hotline
Our member-exclusive Gallivan, White & Boyd Legal Hotline is available free of charge to members as a resource for gathering legal information about the industry before approaching and engaging the services of your own attorney. The Legal Hotline offers direct access to a qualified attorney who can provide information on construction, real estate law and related matters.
If you are in need of legal advice, submit your question via the form below and our Gallivan, White & Boyd Hotline attorney will respond promptly.
If you wish to participate in the legal hotline, please CLICK HERE to download, read and sign a form of acknowledgement and fax or email it to the HBA at (864) 254-0134 or legalhotline@hbaofgreenville.com.
Frequently Asked Questions
(Disclaimer: This information is furnished for educational purposes only and is intended to provide a general discussion of legal issues of interest to the homebuilding community. It is not intended to provide legal advice or legal opinions. Neither the Home Builders Association of Greenville, nor the law firm of Gallivan White & Boyd, PA, warrants the content or undertakes to provide current and updated information. No attorney-client relationship is intended, and this information should not be used as a substitute for competent legal advice regarding specific situations from a licensed attorney.)
Lien Disputes
Q. In South Carolina, how long does a builder have to file a mechanics lien?
A. You must file and serve a Notice of Mechanics Lien and Statement of Account within 90 days of last work or last furnishing of materials.
Q. May I extend the lien time by doing additional work?
A. If the work was essential to complete the contracted work, and not merely a pretext to re-start the lien clock, you might be able to re-start the lien time. For example, it has been held that call-back work that was done reasonably soon after the work was complete will be sufficient to re-start the 90 days.
Q. I filed a notice of mechanic’s lien but still have not been paid. When does a foreclosure suit have to be filed?
A. Within six months of last labor or furnishing, a lawsuit to foreclose the lien must be filed along with a lis pendens, or notice of pending action against the property.
Q. As a homebuilder, what happens if I pay a subcontractor who in turn does not pay his or her subcontractors or material suppliers?
A. One of the most difficult things to control is payment by your subcontractors to potential remote claimants: sub-subcontractors and material suppliers. One protection provided to you is in a Notice of Project Commencement. You can and should file this with the Register of Deeds or Clerk of Court in the appropriate county and post the Notice on the jobsite, with the required language: “The contractor on the project has filed a notice of project commencement at the county courthouse. Sub-subcontractors and suppliers to subcontractors shall comply with Section 29-5-20 when filing liens in connection with this project.” Once the Notice of Project Commencement is filed, the sub-subcontractor or material supplier must serve a Notice of Furnishing Labor or Materials. The Notice of Project Commencement limits the amount potentially owed by the builder or general contractor under a mechanic’s lien to the remaining amount owed to the original subcontractor. Therefore, if a general contractor paid a subcontractor in full, but the subcontractor did not pay the sub-subcontractor, the general contractor could show proof of the payment as a defense to the second tier subcontractor or supplier’s mechanic’s lien. As discussed below, another tool you have available is the joint check agreement. In situations where you suspect your subcontractor is in financial difficulty or is slow to pay his or her suppliers or subs, a joint check may be a useful tool to ensure payment is made according to legal requirements.
Q. How can I avoid a lien when my subcontractor does not meet his or her financial obligations?
A. The best way to avoid a lien by a remote claimant is to address the problem as soon as it arises. If you become aware that one of your subcontractors is not paying their subcontractors and suppliers, you should address the situation immediately. If you still owe the subcontractor money or if the subcontractor still has part of its work left to perform, consider issuing joint checks to the sub-subcontractor or the material supplier. Additionally, failure to pay a sub-subcontractor or material supplier may be a material breach of the contract and may be a terminable offense. You should review the language of the subcontract to make that determination, as the subcontract may have varying time for the subcontractor to cure the failure to pay.
Q. How is a builder protected against false mechanics’ liens?
A. Anyone who files a frivolous lien is subject to a fine up to $5,000 and the loss of his registration and contractor’s license. Additionally, the costs of defending against a lien, including reasonable attorney’s fees, may be recovered by the prevailing party. Just because a lien can be defeated does not make it frivolous, however.
Q. I intend to contest the validity of a mechanics’ lien. How can I do that without disrupting the financing and holding up closing.
A. South Carolina law allows the lien to be removed if you (1) deposit cash with the Register of Deeds or (2) file a surety bond in accordance with statutory requirements. This allows the cash security or bond to be substituted for the property and minimizes project disruption.
South Carolina Notice and Opportunity to Cure Construction Dwelling Defects Act
Q. I have received a verbal complaint that a house I built several years ago has water intrusion damage. What do I do?
A. It is never a good idea to ignore customer complaints, even when the house is several years old. You should start by reviewing your contract and any applicable warranty documents. You should also notify your insurance agents or brokers for all policies in force since you built the house. If appropriate you should consider notifying trade contractors of the claim, as well. In coordination with your insurance representatives and any involved subcontractors, you should consider inspecting the house to determine the cause of the damage and assess your potential responsibility. You should seek legal advice, as well.
Q. I just got sued for alleged construction defects on a house I built nearly eight years ago. No one had notified me of these problems before now. How can they do that?
A. That is very upsetting. However, this is not unusual. First, be sure to get the lawsuit papers in the hands of your insurance agents or brokers for policies covering you since the home was built to be sure that you have legal counsel to respond to the complaint in a timely manner. If you were not notified of the problems before suit, you might have remedies available to you under the South Carolina Notice and Opportunity to Cure Construction Dwelling Defects Act.
Q. Tell me about the South Carolina Notice and Opportunity to Cure Construction Dwelling Defects Act?
A. The purpose of the South Carolina Notice and Opportunity to Cure Construction Dwelling Defects Act is to provide an alternative, potentially less costly means to resolve construction deficiencies in residential construction. The Act provides that a homeowner, including a subsequent purchaser, of a single family home, duplex, or multifamily unit of sixteen units or less and no more than 3 stories, before asserting a claim against a general contractor, design professional, subcontractor, or material supplier, must give notice, either by personal service or certified mail, of a construction defect 90 days prior to filing a lawsuit. If the homeowner does not comply with the Act, the court can stay the action until the homeowner complies.
Q. I just received a Notice of Construction Defects under the Act. What do I do?
A. If you receive a Notice letter, you have 30 days to respond. Under the Act, you can either offer a remedy, offer to settle, or deny the claim. If you deny it, or if the homeowner rejects your offer, they can then bring a legal action against you. You should follow the recommendations above, and get advice from your lawyer and insurance professionals before responding.
Statute of Limitations and Statute of Repose
Q. How does the statute of limitations work?
A. The statute of limitation specifies how long a person with a specific type of claim can wait before he or she must file suit. For most construction claims, the statute of limitations provides that you have 3 years from the date that a claim arises or a defect is discovered to bring a lawsuit or you are forever barred from bringing the suit. While the statute of limitations is a hard and fast rule, South Carolina courts allowed additional time in situations where a party attempts to use the statute to its advantage by delaying a lawsuit with false promises.
Q. How does the statute of repose work?
A. The statute of repose acts as the ultimate time limitation. The period established by law for a statute of repose is the outermost limit within which a legal claim may be brought. While the statute of limitation is based upon time after discovery, the statute of repose is based upon time after the original event occurred, such as the construction of a building. If a building was substantially completed before July 1, 2005, the statute of repose is 13 years. If a building was substantially completed after July 1, 2005, the statute of repose is 8 years. In determining whether a claim is time-barred, you have to consider that the statute of limitations is 3 years after a defect is discovered, regardless of how much more time exists on the statute of repose.
Builders Warranties
Q. I am a South Carolina Home Builder, building new homes on a custom basis. Because I am building for a specific customer, do I have to provide a warranty for the home?
A. If you do not contract with your customer concerning the terms of your warranty, the law in South Carolina will impose warranties on you. First, an implied warranty of habitability arises from the sale of the new home. Second, a builder who contracts to construct a dwelling impliedly warrants that the work undertaken will be performed in a careful, diligent, workmanlike manner. Kennedy v. Columbia Lumber & Mfg. Co., Inc., 299 S.C. 335, 344, 384 S.E.2d 730, 736 (1989). Third, South Carolina cases recognize the existence of implied warranties of “merchantability” and fitness for an intended purpose in connection with new construction.
Q. Does my potential liability for these builder warranties go away when my customer sells the house?
A. No. Although the warranty of workmanlike service arises out of the construction contract to which the builder is a party, a subsequent purchaser may sue a professional builder on the implied warranties of workmanlike service, “merchantability” and fitness for an intended purpose.
Q. How long do these warranties last?
A. Unless you have agreed to a specific duration with your customer, these implied warranties attach for a “reasonable” time, in other words, whatever duration a court decides.
Q. I heard South Carolina makes a builder liable on his warranty for 13 years.
A. That is a bit of a myth. South Carolina once had a 13 year statute of repose. The period of the statute of repose is the outermost limit within which a legal claim may be brought. A court might determine that it is reasonable that a warranty to correct critical structural elements could extend all the way to the limit of the statute of repose. On the other hand, building materials subject to wear and tear would have a shorter duration. Since 2005, the statute of repose has been set at 8 years. This applies to houses substantially completed after July 1, 2005. You also have to consider that the statute of limitations expires three years after a defect is discovered, regardless of how much more time exists on the statute of repose, which sets the outer limits for commencing a lawsuit.
Q. How does the statute of limitations work?
A. Generally, the statute of limitations acts as a door-shutting provision, which says that you have 3 years from the date that the defect or claim is discovered to bring a lawsuit or you are forever barred from bringing the suit. While the statute of limitations is a hard and fast rule, South Carolina courts allowed for additional time in situations where a party attempts to use the statute to its advantage by delaying a lawsuit with false promises.
Q. How does the state of repose work?
A. The statute of repose acts as the ultimate time limitation. While the statute of limitation is based upon time after discovery, the statute of repose is based upon time after the original event occurred, such as the construction of a building. As discussed above, if a building was substantially completed before July 1, 2005, the statute of repose is 13 years. If a building was substantially completed after July 1, 2005, the statute of repose is 8 years. Generally, the date the Certificate of Occupancy is issued is evidence of when “substantial completion” is attained.
Q. If I decide to sell a house “as-is”, with no warranties, can I contract to do so?
A. There is language in a South Carolina case that supports a disclaimer of these warranties. Efforts to fully disclaim warranties in connection with the sale of a new home would be strongly disfavored, and the language will be strictly construed. To have any chance of being enforced, such disclaimers must be (1) conspicuous, (2) known to the buyer, and (3) specifically bargained for.
Q. Let’s say I only want to limit the duration of the warranty and set out some specific procedures to be followed. Can I at least do that?
A. Absolutely. But again the language you use must be carefully drafted and should also be (1) conspicuous, (2) known to the buyer, and (3) specifically bargained for, to the extent it seeks to limit the buyer’s warranty remedies. You may say “this sounds complicated”, it is very complicated, and the law in this state is “fluid” and remains very protective of homebuyers. You definitely should have your legal counsel draft language for you if you intend to ask your customer to agree to any limitation or disclaimer of builder warranties.
If you wish to participate in the Gallivan White & Boyd Legal Hotline, please read and sign this form of acknowledgement and fax or email it to the HBA at (864) 254-0134 or legalhotline@hbaofgreenville.com.
