Cancellation of Lien by Corporation
Note: This summary is not intended to be an all inclusive discussion of Utah construction or mechanic's lien laws, but does include basic provisions.
What is a construction or mechanic's lien?
Every State permits a person who supplies labor or materials for a construction project to claim a lien against the improved property. While some states differ in their definition of improvements and some states limit lien claims to buildings or structures, most permit the filing of a document with the local court that puts parties interested in the property on notice that the party asserting the lien has a claim. States differ widely in the method and time within which a party may act on their lien. Also varying widely are the requirements of written notices between property owners, contractors, subcontractors and laborers, and in some cases lending institutions. As a general rule, these statutes serve to prevent unpleasant surprises by compelling parties who wish to assert their legal rights to put all parties who might be interested in the property on notice of a claim or the possibility of a claim. This by no means constitutes a complete discussion of construction lien law and should not be interpreted as such. Parties seeking to know more about construction laws in their State should always consult their State statutes directly.
Who can claim a lien in this State?
Contractors, subcontractors, and all persons performing any services or furnishing or renting any materials or equipment used in the construction, alteration, or improvement of any building or structure or improvement to any premises in any manner and licensed architects and engineers and artisans who have furnished designs, plats, plans, maps, specifications, drawings, estimates of cost, surveys or superintendence, or who have rendered other like professional service, or bestowed labor, shall have a lien upon the property upon or concerning which they have rendered service, performed labor, or furnished or rented materials or equipment for the value of the service rendered, labor performed, or materials or equipment furnished or rented by each respectively, whether at the instance of the owner or of any other person acting by his authority as agent or contractor.
How does a party start the lien process?
A preliminary notice is a type of pre-lien notice that must be served on a property owner before any lien can be claimed later on. The notice is a required process under Utah's mechanic's lien law, and failure to comply may result in loss of the potential claimant's right to a mechanic's lien.
Any person who desires to claim a construction lien against real property must file a preliminary notice with the construction registry no later than 20 days after the day on which the person commences providing construction work on the real property. UTAH CODE ANN. 38-1A-501(1)(a). The preliminary notice will then be effective as to all construction work that the person filing the notice provides to the construction project under a single original contract, including construction work that the person provides to more than one supervisory subcontractor under that original contract. 38-1A-501(1)(b).
If a person who desires to claim a construction lien on real property fails to file a timely preliminary notice within the above period specified, he or she may file a preliminary notice with the registry after the period specified. 38-1A-501(1)(c)(i). However, any person who files a preliminary notice is not permitted to claim a construction lien for construction work the person provides to the construction project before the date that is five days after the preliminary notice is filed. 38-1A-501(1)(c)(ii).
Aside from the exception described above, a preliminary notice has no effect if it is filed more than 10 days after the filing of a notice of completion for the construction project for which the preliminary notice is filed. 38-1A-501(1)(d). Any person who fails to file a preliminary notice as required may not claim a construction lien under Utah law. 38-1A-501(1)(e). A preliminary notice that is filed with the registry is considered to be filed at the time of the first preliminary notice filing. 38-1A-501(1)(f).
If a preliminary notice filed with the registry includes the tax parcel identification number (TPIN) of a parcel not previously associated in the registry with a construction project, the designated agent shall promptly notify the person who filed the preliminary notice that: (i) the preliminary notice includes a tax parcel identification number of a parcel not previously associated in the registry with a construction project; and (ii) the likely explanation is that the preliminary notice is the first filing for the project; or the tax parcel identification number is incorrectly stated in the preliminary notice. 38-1A-501(1)(g).
The preliminary notice document includes the following: (1) the name, address, telephone number, and email address of the person providing the construction work for which the preliminary notice is filed; (2) the name and address of the person who contracted with the claimant; (3) the name of the record or reputed owner; (4) the name of the original contractor; (5) the address of the project property or a description of the location of the project; (6) the name of the county in which the project property is located; (6) the tax parcel identification number of each parcel included in the project property; (7) the entry number of a previously filed notice of construction loan on the same project; (8) the entry number of a previously filed preliminary notice on the same project that includes the tax parcel identification number of each parcel included in the project property; and (9) the entry number of the building permit issued for the project. 38-1A-501(1)(h).
The burden is upon the person filing the preliminary notice to prove that the person has substantially complied with its requirements. 38-1A-501(2)(a). This means the person files a preliminary notice that links, within the registry, to a preliminary notice filed by an original contractor for the same construction project, using the entry number assigned to the original contractor's preliminary notice. 38-1A-501(2)(b).
Substantial compliance as the remaining requirements of the notice may be established by a person's reasonable reliance on information in the registry provided by a previously filed: (1) notice of construction loan; (2) preliminary notice; or (3) building permit. 38-1A-501(2)(c).
Any person required to give preliminary notice is required to give only one notice for each construction project. 38-1A-501(3)(a). If the construction work is provided pursuant to contracts under more than one original contract for construction work, the notice requirements shall be met with respect to the construction work provided under each original contract. 38-1A-501(3)(b).
If filing a preliminary notice by alternate means, the person filing is responsible for verifying and changing any incorrect information in the preliminary notice before the expiration of the time period during which the notice is required to be filed. 38-1A-501(4). A person who files a preliminary notice that contains inaccurate or incomplete information may not be held liable for damages suffered by any other person who relies on the inaccurate or incomplete information in filing a preliminary notice. 38-1A-501(5).
How long does a party have to claim a lien?
According to Utah Code 38-1a-502:
(1)(a) A person who desires to claim a construction lien shall submit for recording in the office of each applicable county recorder a notice of construction lien no later than, except as provided in Subsection (1)(b):
(i) 180 days after the date on which final completion of the original contract occurs, if no notice of completion is filed under Section 38-1a-507; or
(ii) 90 days after the date on which a notice of completion is filed under Section 38-1a-507, but not later than 180 days after the date on which final completion of the original contract occurs.
(b) A subcontractor who provides substantial work after a certificate of occupancy is issued or a required final inspection is completed and desires to claim a construction lien shall submit for recording in the office of each applicable county recorder a notice of construction lien no later than 180 days after final completion of that subcontractor's work.
(2) A notice of construction lien shall contain:
(a) the name of the reputed owner if known or, if not known, the name of the record owner;
(b) the name of the person by whom the claimant was employed or to whom the claimant provided construction work;
(c) the time when the claimant first and last provided construction work;
(d) a description of the project property, sufficient for identification;
(e) the name, current address, and current phone number of the claimant;
(f) the amount claimed under the construction lien;
(g) the signature of the claimant or the claimant's authorized agent;
(h) an acknowledgment or certificate as required under Title 57, Chapter 3, Recording of Documents; and
(i) if the construction lien is on an owner-occupied residence, as defined in Section 38-11-102, a statement describing what steps an owner, as defined in Section 38-11-102, may take to require a lien claimant to remove the lien in accordance with Section 38-11-107.
How long is a lien good for?
In order to enforce a preconstruction lien or construction lien, a claimant shall file an action to enforce the lien:
(a) except as provided in Subsection (2)(b), within 180 days after the day on which the claimant files:
(i) a notice of preconstruction lien under Section 38-1a-402, for a preconstruction lien; or
(ii) a notice of construction lien under Section 38-1a-502, for a construction lien; or
(b) if an owner files for protection under the bankruptcy laws of the United States before the expiration of the 180-day period under Subsection (2)(a), within 90 days after the automatic stay under the bankruptcy proceeding is lifted or expires. (Utah Code 38-1a-701)
Does this State require or provide for a notice from subcontractors and laborers to property owners?
Yes. A contractor is required to record and serve upon the property owner a Notice of Commencement and a subcontractor or supplier a very similar Preliminary Notice.
