Almost all attorney-client conversations about a possible lawsuit end with the same question:
How can I recover my attorney’s fees?
In certain situations—particularly in the construction industry—the state legislatures in North Carolina and South Carolina have set forth requirements that must be met for litigants to have the opportunity to seek recovery of their attorney’s fees. Unfortunately, if you do not know and meet the requirements, the simple answer to the question about recovering attorney fees is often “No—you cannot recover your legal fees” because the simple fact is that the American legal system’s default general rule is that clients—win or lose—are usually responsible for their own legal fees.
However, “usually” does not mean “always”.
The most familiar avenue for making a claim for attorney’s fees in a construction case is when a contractor is attempting to enforce a mechanic’s lien.
The mechanic’s lien statutes for both North Carolina and South Carolina allow a contractor to make a claim for attorney’s fees when a contractor files a lawsuit to enforce a mechanic’s lien. However, lien enforcement claims not only provide an opportunity for contractors to claim their fees; they also open the door for the owners to claim their fees as well.
Ultimately, the question of who can collect their attorney’s fees comes down to who “prevails” on the lien enforcement claim or the lawsuit. In South Carolina, the focus is on the lawsuit as a whole, and the prevailing party is the party whose claim (or counterclaim) amount is closer to the actual judgment amount. In North Carolina, the focus is on the specific lien claim, and the “prevailing party” is (1) the party asserting the lien if the judgment is at least 50% of the lien amount or (2) the party defending against the lien if the judgment is less than 50% of the lien amount. In addition, to recover fees in North Carolina, the prevailing party must prove that the losing party unreasonably refused to resolve the matter.
Another common option for recovering attorney’s fees is through a contractual provision that allows for recovery of fees.
In South Carolina, the parties may simply contract for the recovery of attorney’s fees in the event of a breach of the contract. North Carolina is a bit more complicated. Under North Carolina law, parties can include an attorney’s fees recovery provision in a contract so long as the attorney’s fee provision is reciprocal—meaning either party can recover if they prevail—and it is a part of a “business contract.” The statute defines “business contract” as a contract entered into primarily for “business or commercial purposes” and does not include a consumer contract, an employment contract, or a government contract. In other words, an attorney’s fee recovery provision in a residential construction contract or a government construction contract is likely unenforceable, but the same provision in a commercial construction contract would be enforceable.
South Carolina provides one additional tool for recovery of attorney’s fees for contractors.
S.C. Code § 27-1-15 allows a contractor who has furnished labor or materials for the improvement of real property to make a demand for payment on the party with whom they contracted by register or certified mail. The party in receipt of that demand then has 45 days from the date of mailing within which to make a “reasonable and fair investigation” of the merits of the payment demand and pay the portion deemed to be valid as a result of the investigation. If the party receiving the demand fails to make a fair investigation or otherwise unreasonably refuses to pay the proper portion of the demanded amount, they are liable for reasonable attorney’s fees and interest from the date of the demand.
If you are drafting a contract, entering into an agreement, involved in a dispute that may result in a lawsuit, or are already in a lawsuit, we can work with you to put yourself in the best position to make claims now or in the future to recover your attorney’s fees. Contact Carolinas Construction Attorneys at 704-376-3030.