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Utah mechanic's lien and construction bond.

The Utah 2004 legislature passed and the governor signed, several bills affecting mechanic's liens and construction bonds. All but one of the bills took affect May 3, 2004. A bill regarding an electronic filing registry provides for development of a system to be ready by May 2005, at which time the rules for its use will become effective. A short synopsis of the new laws follows. You can locate the full text of the bills on line at www.le.state.ut.us under Searchable Infobases and then selecting numbered or enrolled bills.

Construction Bonds--House Bills 20 and 219

House Bill 20 made technical corrections that make clear that those claiming on a bond must file the preliminary lien notice unless the claimant is in privity of contract with the payment bond principal, a person performing labor for wages, or unless no notice of commencement was filed.

House Bill 219 provides definitions for commercial and residential construction. Essentially residential is single family detached housing and attached housing up to and including fourplexes. Commercial construction is defined as "not residential construction." This bill then provides that payment bonds are required on any "original commercial contract exceeding $50,000.00 ...". An owner who fails to obtain the bond is personally liable.

Mechanic's Liens--House Bills 32 and 182 and Senate Bill 111

House Bill 32 states liens must now be filed within 90 days of final completion of the original contract whether on residential or commercial jobs. "Final completion" is defined to be:

1) the date of issuance of permanent certificate of occupancy; or if none, then

2) the date of the final inspection; or if none, then

3) the date on which there remains no substantial work to be completed.

The lien notice now must contain the dollar amount of the claim. An action to enforce the lien must be filed within 180 days of the date the lien was filed. This bill also includes some clarification of prior practices and technical changes.

House Bill 182 provides for yet another notice before filing a lien. A lien claimant is to provide 15 days prior written notice by "signature confirmation mail" to the person or entity that contracted with the lien claimant. The notice should state the amount due, who owes the money and, presumably, that the lien claimant intends to file a lien. This provision applies to liens filed on or after July 1, 2004. Curiously, failure to comply with the provision appears to carry no penalty. I'm sure that will change.

Senate Bill 111 provides that a subcontractor may request that the original (general) contractor provide a list of each preliminary notice received on the project. The notice is to be provided by the original contractor within 14 calendar days of the date the request is made.

Residential Lien Recovery Fund--House Bill 62

House Bill 62 creates a provision for a "Certificate of Compliance." This certificate is to be obtained from the Division of Occupational and Professional Licensing ("DOPL") by the owner of residential property when there is a question about a lien being maintained. The certificate, if issued by DOPL after it reviews the situation, establishes that the owner has complied with the provisions that prevent a mechanic's lien from being maintained. Judicial determinations are delayed until the owner has had an opportunity to obtain the certificate. Once the certificate is obtained and notice is provided to the lien claimant, the lien claimant will have 15 days to remove the lien. Notice is given by sending a copy of the certificate to the lien claimant by certified mail. The certificate will then be part of the package the lien claimant submits to DOPL to make a claim against the Residential Lien Recovery Fund.

Electronic Filing--House Bill 136

I have listed this separately even though it affects mechanic's liens. This law directs DOPL to establish a system for online filing of notices of commencement, preliminary lien notices and notices of completion. It contemplates issuance of a number to each construction project in connection with the issuance of the building permit so the project can be listed on a Construction Notice Registry Database. The Database will be a central repository for all private jobs as well as for state and local government owned jobs.

DOPL is to develop the rules for this. It is intended that the registry will be in place and the law effective by May 1, 2005. When it goes into effect, it will replace what we have been doing with the filing of notices of commencement, and preliminary lien notices and will introduce the filing of a notice of completion.

Liens and Bonds are two of the areas that the legislature always seems to want to "adjust." The "adjustments" this year are both helpful and ... well, not as helpful. This article, hopefully, has alerted you to the essence of the changes. Please, please, please do not use this article as a substitute for competent legal advice.

Scott Lee is a Partner in the law firm Randle Deamer & Lee in Salt Lake City, specializing in real estate and business litigation. He can be reached at ulaw@xmission.com.
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Title Annotation:Lien Law Update
Author:Lee, Scott W.
Publication:Business Credit
Geographic Code:1U8UT
Date:Jun 1, 2004
Words:859
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