North Carolina Business and Law Exam (General Contractors)

Key Concepts

Governing Law: The Sedimentation Pollution Control Act of 1973 is the primary statute. It is administered by the NC Department of Environmental Quality (NCDEQ), Division of Energy, Mineral, and Land Resources (DEMLR).

Applicability: The Act applies to any land-disturbing activity that disturbs one or more acres, or any activity within a High Quality Water zone regardless of size. Activities disturbing less than one acre may still be subject to local ordinances.

Exemptions: Agriculture, forestry operations (with approved BMPs), mining (covered under separate law), and certain emergency activities may be exempt from the Act.

Erosion and Sedimentation Control (E&SC) Plan: - Required before beginning any regulated land-disturbing activity - Must be submitted to and approved by NCDEQ or an approved local program before land disturbance begins - Plans must be prepared and sealed by a licensed engineer, landscape architect, or land surveyor for projects over a certain threshold - The plan must demonstrate that measures will be in place to retain sediment on-site

Mandatory Standards (must meet ALL): - Buffer zones: A minimum vegetated buffer must be maintained along all perennial and intermittent streams, lakes, and estuaries — typically 30 feet on each side (local programs may require more) - Grading slopes: Cut and fill slopes must be stabilized; steeper slopes require more robust measures - Ground cover timelines: - Exposed slopes must have temporary or permanent ground cover within 21 calendar days after the last land-disturbing activity - All disturbed areas not actively being worked must be stabilized within 15 working days of the most recent disturbance (some programs use calendar days — know your local rules)

Key Concepts

When a License Is Required A contractor's license is required for any construction contract $40,000 or more. No license needed for subcontractors working under a licensed GC, or for landowners building a home solely for personal/family use for 12 months after completion.

License Classifications (§87-1) - Building – commercial/industrial structures - Residential – dwelling units - Highway – roads, bridges, grading - Public Utilities – water, sewer, gas, electrical distribution - Specialty – specific trade work - Unclassified – encompasses ALL classifications above

License Limitations (Working Capital Requirements)

Surety Bond Alternative (in lieu of working capital)

If a bond is canceled, the surety and applicant must notify the Board immediately. License is suspended if written proof of financial responsibility is not provided within 30 days of cancellation.

Application & Examination Process 1. Submit application (free, available at nclbgc.org); reviewed twice per month 2. Board evaluates character, competency, integrity, criminal background, financial ability 3. Register with PSI; pay exam fee of $79 4. Take exam; may retake after 30 days if failed 5. Pay nonrefundable license fee: Unlimited $125 / Intermediate $100 / Limited $75 6. License issued and must be displayed at place of business

Key Concepts

Statutory Definitions (NCGS 22C-1) - Contractor: a person who contracts with an owner to improve real property - Subcontractor: a person who contracts with a contractor (or another subcontractor) to perform part of the work - Owner: person who owns or controls real property and contracts for its improvement - Improve: includes construction, alteration, repair, demolition, or development of real property

Seven-Day Payment Rule (NCGS 22C-3) Once a contractor receives payment from the owner, the contractor must pay each subcontractor within 7 days. If the contractor receives partial payment, subcontractors must receive a proportionate share within 7 days.

Prohibition on Pay-If-Paid and Pay-When-Paid Clauses (NCGS 22C-2) North Carolina prohibits contractual provisions that make a subcontractor's right to payment contingent on the contractor first receiving payment from the owner. Both "pay-if-paid" and "pay-when-paid" clauses are void and unenforceable in NC subcontracts. Subcontractors have an independent right to payment regardless of whether the contractor has been paid.

Permissible Grounds for Withholding Payment (NCGS 22C-4) A contractor may withhold payment from a subcontractor only for the following reasons: - Unsatisfactory performance or failure to perform the subcontract - A subcontractor's failure to pay their own sub-subcontractors or suppliers - A good-faith dispute over the amount owed - Failure of the subcontractor to comply with the terms of the subcontract

The contractor must notify the subcontractor in writing of the reason for withholding within 7 days of the decision to withhold.

Key Concepts

Mechanics' Lien Rights by Contract Tier (NCGS Chapter 44A, Article 2)

Lien rights depend entirely on who you contracted with:

• Owner-direct (Prime Contractor): Lien rights attach directly against the real property
• First-tier subcontractor (contracted with GC): Lien rights against funds owed to the GC by the owner
• Second-tier subcontractor (contracted with first-tier): Lien rights against funds owed to first-tier by the GC
• Third-tier subcontractor (contracted with second-tier): Lien rights against funds owed to second-tier by first-tier
• Remote (beyond third-tier): Lien rights against funds owed to the party they directly contracted with

Only the prime contractor has a lien directly on the land itself. All others have a lien upon funds (not the real property).

NC Lien Agent System (Effective April 1, 2013 — NCGS Chapter 44A, Article 2)

• Owner designates a lien agent via Appointment of Lien Agent; managed at www.liensnc.com
• Potential lien claimants may (not required) file a Notice to Lien Agent to protect their position
• Closing attorneys, lenders, and buyers can search the system to identify all known potential claimants
• Three steps: (1) Register project/appoint lien agent, (2) File Notice(s) to Lien Agent, (3) Search projects

Notice of Contract

• Filed by the general contractor with the Clerk of Superior Court within 30 days of building permit issuance
• Must be posted on the property in a visible location adjacent to the building permit
• Contains: contractor name/address, owner name/address, property description, name of filer

Notice of Subcontract

Key Concepts

Who NC811 Is and Is Not NC811 is a nonprofit funded by member facility operators. It receives and transmits locate notifications — it does not physically mark facilities, settle disputes, or maintain exact facility locations. Non-member facility owners receive no notification.

Excavator Notification Timing (G.S. 87-123/87-124) - Standard excavation: notify NC811 no sooner than 12 and no later than 3 full working days before digging begins - Subaqueous facilities: notify within 10 to 20 full working days before commencement - The 3-day clock starts the working day after notice is given (not the day of the call) - Contact: dial 811 or 1-800-632-4949, or visit nc811.org

Types of NC811 Notifications | Type | Purpose | |---|---| | Normal | Standard locate request | | Update | Extend an existing ticket before it expires | | Retransmit | Resend to a specific operator | | Emergency | Immediate threat to life or property | | Report of Damage | After striking a facility | | Destroyed Marks | Marks obliterated before work is complete | | Design/Survey | Pre-project planning; no digging yet | | Three-Hour | Used when excavator observes signs of an unmarked facility at the dig site |