Keep in mind that under the South Carolina mechanic’s lien statute, a prior recorded mortgage has priority over a later-filed mechanic’s lien. Thus, if there is very little equity in the property because of a loan secured by the mortgage, a mechanic’s lien will have little value. What if the property does not have enough value to satisfy all of the mechanic’s liens? The remaining proceeds from the property sale will be pro-rated among the mechanic’s lien claimants after payment to any secured lender.
But there are further limitations. Suppose for example, that the owner owes $50,000 to the general contractor which has failed to pay its subcontractors a total of $75,000, having improperly diverted payments to other jobs. Because the amount due to the contractor from the owner is less than the amount needed to pay all of the subcontractors’ lien claims, the owner will prorate the $50,000 payment owed to the contractor among the mechanic’s lien claimants. Similarly, if the amount due to a subcontractor by the general contractor is not sufficient to pay all mechanic’s lien sub-subcontractor claimants, all liens must be prorated by the contractor among sub-subcontractors and suppliers to that subcontractor.
But what about more remote third tier subcontractors and suppliers? Their rights may be limited to the amount due by the contractor to the subcontractor to whom the sub-subcontractor or supplier has supplied labor, material, or services, unless the third tier subcontractor has provided notice of furnishing labor or materials by to the contractor. By providing such notice to the general contractor, a third tier subcontractor has put the general contractor on notice that it is performing work and thus the burden on the general contractor to protect its interests when making payment to its subcontractors.
South Carolina’s courts will allow recovery of overhead and profit in a mechanic’s lien foreclosure action, but only if the contract includes an agreement to pay overhead and profit.