South Carolina

Construction Lending State Compliance Library

State statute reference
Last updated April 7, 2023

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South Carolina

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Construction Lien Law

Lien Waivers

Notices

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South Carolina Construction Lien Law

Lien Law Overview

In South Carolina, mechanics liens are purely statutory and may be acquired and enforced only in strict compliance with the statutes creating them. See S.C.
Code Ann.§ 29-5-10 (2007), et seq. See also Ferguson Fire & Fabrication, Inc. v.
Preferred Fire Protection, LLC, 409 S.C. 331, 343, 762 S.E.2d 561, 567 (2014).

The statutory process is to create, perfect, and enforce the lien.

A mechanics lien is created when a contractor, subcontractor, or other person improves real property by furnishing labor and/or materials for a building or structure. 22 S.C. Jur. Mechanics Liens § 2 (1994). “Because the improvements usually attach to and become an inseparable part of the structure, the lien statutes give the persons responsible for the improvements a security interest, or a lien on the improvement to the value of the amount due them.” Id. § 3.

A mechanics lien is only valid when it is perfected and enforced by:

serving and filing a statement of account (subcontractors must also file a notice to owner);
filing a lawsuit to enforce the lien, and
filing a lis pendens as provided in S.C. Code Ann.§ § 29-5-10 and 29-5-120.

The date for determining when all three of these events must be performed is the date when they stop furnishing labor or materials.

Lien Waivers

Lien Waiver Summary

South Carolina does not have statutory lien waivers, meaning forms (or language) that are required by law to use. Use industry best practices and lien waiver forms acceptable to the lender.

Statutory Form
Not Required

Are title companies required by law to manage construction loan disbursements?

No.

Can a mechanics lien have priority over a pre-existing mortgage in South Carolina?

It depends. The general rule is that a recorded mortgage has priority over subsequently filed mechanics liens. S.C. Code Ann. § 29-5-70 (2007). However, a mechanics lien has priority over any future advances made under the construction loan after filing of the notice of the mechanics lien required by Section 29-5-90 and service of the notice on all prior recorded mortgage holders. The priority of the mechanics lien extends only to the mortgage disbursements made after the filing of the lien and service of the notice on all prior recorded mortgage holders. S.C. Code Ann. § 29-3-50 (1976).

When there are insufficient funds to pay competing mechanics lien claims, payments will be prorated. If the amount due the contractor by the owner is insufficient to pay all the lienors acquiring liens, the owner must prorate the amounts due to the contractor among all just claims. If the amount due a subcontractor by the contractor is insufficient to pay all the lienors acquiring liens under Section 29-5-20 as a result of supplying labor, materials, or services to that subcontractor, all just liens must be prorated by the contractor among sub-subcontractors and suppliers to that subcontractor. S.C. Code Ann.
§ 29-5-60 (1993).

Notices

Notice of Commencement (or similar like event)

Yes (Notice of Project Commencement) – §29-5-23
In South Carolina, a Notice of Project Commencement is required to be filed within 15 days at the County Register of Deeds Office.

SECTION 29-5-23. Notice of Project Commencement; location notice; failure to file notice.

Any person entering into a direct agreement (or consent from the owner) for the improvement of real property may file where the property is situate, a ‘notice of project commencement’. The notice of project commencement shall contain the following information:

the name and address of the person filing the notice of commencement;
the name and address of the owner or developer;
a general description of the improvement; and
the location of the project.

The notice must be filed within fifteen days of the commencement of work and must be accompanied by a filing fee of fifteen dollars.

A location notice also must be posted at the job site. The location notice must contain the name and address of the contractor as well as the following statement: “The contractor on the project has filed a notice of project commencement at the county courthouse. Please note that Sub-subcontractors and suppliers to subcontractors shall comply with Section 29-5-20 when filing liens in connection with this project.” The failure to file a notice of project commencement shall render the provisions of Sections 29-5-20(B) and 29-5-60(B) inapplicable.

The failure to file a notice of project commencement shall also render the provisions of Sections 29-5-440, 11-35-3030(2)(c), 57-5-1660(b), and 11-1-120, relating to the requirement of a notice of providing labor, materials, or rental equipment inapplicable for a claim against a payment bond furnished by a contractor holding a direct contractual agreement with an owner.

Who files the Notice of Commencement?

Property Owner

General Contractor, or Other

When must it be filed?

Within 15 days of starting work on a project.

Is a Designee required?

The name and person of the person filing, as well as the name(s) of the owner, are required on the notice. Since this is not a statutory form you may include other parties to be notified such as the lender. The status does not specifically address this issue but it would be a best practice to list additional parties that should benefit from receiving the notices.

Is it required to be posted on the Job Site

Yes. At the job site, it is mandatory to display a location notice that includes the contractor’s name, address, and the following statement:
“The contractor on the project has filed a notice of project commencement at the county courthouse.”

Preliminary Lien Notifications

To perfect a mechanics lien, both general and subcontractors must file a ‘statement of account’ within ninety (90) days of the last day of work. See S.C. Code Ann. § 29-5-90. All subcontractors must – in addition to a ‘statement of account’- provide a ‘notice to the owner’ under S.C Code Ann. § 29-5-40. The lien is dissolved unless the statement of account is filed and served on the owner within 90 days of the last day of work.

Notice of Completion

Not applicable.

Other Notices

The South Carolina Mechanics Lien Law governs notices. See S.C. Code Ann.§ 29-5-10, et seq.

Notice to owner (Subcontractor): Any laborer, mechanic, contractor or materialman that is not in direct contract with the owner must notify the owner, in writing, of the furnishing of such labor or material and the amount or value of the work and/or materials. Upon giving notice, a mechanics lien will attach on the improved real estate against the owner for the amount of the work done or materials furnished. S.C. Code Ann.§ 29-5-20.
Notice or Certificate of Lien: Within ninety (90) days after work stops or the last materials were furnished, a mechanics lien must serve upon the owner (or person in possession of the property) and file with the register of deeds or clerk of court a notice or a certificate that includes a statement of the amount due, together with a description of the property intended to be covered by the lien, the name of the owner of the property, if known, and other required information. See S.C. Code Ann. § 29-5-90 (2007).
Notice of Lis Pendens: A mechanics lien is dissolved unless, within six months after the claimant stops work or furnishing labor or material for the building or structure, a lawsuit is filed and a Notice of Lis Pendens is filed of record. See S.C. Code Ann. § 29-5-120. Failure to follow these steps will dissolve the lien.

Title

South Carolina uses ALTA title commitments that allow for the Construction Loan Update Endorsement, which is used when the lender requests endorsements as additional disbursements are made. It gives coverage up to the new outstanding mortgage balance and shows whether any other instruments have been filed and recorded since the last title update. The endorsement also insures the priority of the insured mortgage over instruments that are not specifically listed in the endorsement. Since the title company has a stake in the disbursements, you may find that they exercise some due diligence relating to construction draws.