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H.B. 335 Enrolled

                 

MECHANICS' LIENS AMENDMENTS

                 
2001 GENERAL SESSION

                 
STATE OF UTAH

                 
Sponsor: Kevin S. Garn

                  This act modifies the Mechanics' Lien Act. The act provides for the recording of a notice of
                  release of lien and substitution of alternate security in order to release property encumbered
                  by a mechanics' lien. The act prohibits the variance by agreement of the provisions of the
                  Mechanics' Lien Act.
                  This act affects sections of Utah Code Annotated 1953 as follows:
                  AMENDS:
                      38-1-27, as last amended by Chapter 110, Laws of Utah 1991
                  ENACTS:
                      38-1-28, Utah Code Annotated 1953
                      38-1-29, Utah Code Annotated 1953
                  Be it enacted by the Legislature of the state of Utah:
                      Section 1. Section 38-1-27 is amended to read:
                       38-1-27. Preliminary notice to original contractor -- Form and contents -- Service --
                  Notice of commencement of project or improvement.
                      (1) This section relating to preliminary notices does not apply to residential construction
                  or to work performed in the development of subdivisions whose end use is for residential
                  construction. For the purposes of this section, residential construction means single family
                  detached housing and multifamily attached housing up to and including fourplexes, and includes
                  rental housing.
                      (2) Except subcontractors who are in privity of contract with an original contractor or
                  except for persons performing labor for wages, any person claiming, reserving the right to claim,
                  or intending to claim a mechanic's lien under this chapter for labor, service, equipment, or material
                  shall provide preliminary notice to the original contractor as prescribed by this section. Any
                  person who fails to provide this preliminary notice has no right to claim a mechanic's lien under
                  this chapter.


                      (3) The preliminary notice required by this section shall be in writing and may be given at
                  any time during the course of the project or improvement.
                      (4) A person required by this section to give preliminary notice is only required to give one
                  notice for each project or improvement, which may include an entire structure or a scheme of
                  improvements.
                      (5) If the labor, service, equipment, or material is furnished pursuant to contracts with more
                  than one subcontractor or with more than one original contractor, the notice requirements must be
                  met with respect to the labor, service, equipment, or materials furnished to each such subcontractor
                  or original contractor.
                      (6) The person required by this section to give preliminary notice is precluded from making
                  a claim for any labor, service, equipment, or material which was provided more than 45 days prior
                  to the date the preliminary notice is given. The preliminary notice must be given before a notice of
                  lien is filed with the county recorder pursuant to Section 38-1-7 .
                      (7) The preliminary notice under this section shall include:
                      (a) the name, address, and telephone number of the person furnishing the labor, service,
                  equipment, or material;
                      (b) the name and address of the person who contracted for the furnishing of the labor,
                  service, equipment, or material; and
                      (c) the address of the project or improvement or a drawing sufficient to describe the location
                  of the project or improvement.
                      (8) (a) Service of a preliminary notice is sufficient if the notice is deposited in the United
                  States mail, certified or registered, return receipt requested, postage prepaid. Service of the
                  preliminary notice by mail is complete upon deposit of the certified or registered mail.
                      (b) A preliminary notice served by mail may be addressed to the original contractor at his
                  place of business, or his address as shown on the notice of commencement on record with the county
                  recorder as required by Subsection (10).
                      [(9) The applicability of this section, including the waiver of rights or privileges granted or
                  protected by this section, may not be varied by agreement.]

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                      [(10)] (9) Any right to assert a defense of failure to comply with the preliminary notice
                  requirements of this section is void unless the original contractor records a notice of commencement
                  of the project or improvement with the county recorder for the county or counties where the project
                  is located within 30 days after commencement of the project. The notice of commencement shall
                  include the following:
                      (a) the name and address of the owner of the project or improvement;
                      (b) the name and address of the original contractor;
                      (c) the name and address of the surety providing any payment bond for the project or
                  improvement, or if none exists, a statement that a payment bond was not required for the work being
                  performed;
                      (d) the name and address of the project; and
                      (e) a legal description of the property on which the project is located.
                      Section 2. Section 38-1-28 is enacted to read:
                      38-1-28. Notice of release of lien and substitution of alternate security.
                      (1) The owner of any interest in real property which is subject to a mechanics' lien recorded
                  under this chapter, or any original contractor or subcontractor affected by the lien, who disputes the
                  correctness or validity of the lien may, either before or after the commencement of an action to
                  enforce the lien, record a notice of release of lien and substitution of alternate security, which meets
                  the requirements of Subsection (2), in the office of the county recorder where the lien was recorded.
                      (2) A notice of release of lien and substitution of alternate security recorded under
                  Subsection (1) shall meet the requirements for the recording of documents in Title 57, Chapter 3,
                  Recording of Documents, shall reference the lien sought to be released, and shall have as an
                  attachment a surety bond or evidence of a cash deposit which:
                      (a) (i) if a surety bond, is executed by a surety company which is treasury listed, A-rated by
                  AM Best Company, and authorized to issue surety bonds in this state; or
                      (ii) if a letter of credit or evidence of a cash deposit, meets the requirements established by
                  rule by the Department of Commerce in accordance with Title 63, Chapter 46a, Utah Administrative
                  Rulemaking Act;

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                      (b) is in an amount equal to 150% of the amount claimed by the lien claimant in connection
                  with the parcel of real property sought to be released;
                      (c) is made payable to the lien claimant;
                      (d) is conditioned for the payment of the judgment which would have been rendered against
                  the property in the action to enforce the lien together with any costs and attorneys' fees awarded by
                  the court; and
                      (e) has as principal the owner of the interest in the real property, or the original contractor
                  or subcontractor affected by the lien.
                      (3) Upon the recording of the notice of release of lien and substitution of alternate security
                  under Subsection (1), the real property described in the notice shall be released from the mechanics'
                  lien to which the notice applies.
                      (4) (a) Upon the recording of a notice of release of lien and substitution of alternate security
                  under Subsection (1), the person recording the notice shall cause a copy of the notice, together with
                  any attachments, to be served within 30 days upon the lien claimant.
                      (b) If a suit is pending to foreclose the lien at the time the notice is served upon the lien
                  claimant under Subsection (4)(a), the lien claimant shall, within 90 days from the receipt of the
                  notice, institute proceedings to add the alternate security as a party to the lien foreclosure suit.
                      (5) The alternate security attached to a notice of release of lien shall be discharged and
                  released upon:
                      (a) the failure of the lien claimant to commence a suit against the alternate security within
                  the same time as an action to enforce the lien under Section 38-1-11 ;
                      (b) the failure of the lien claimant to institute proceedings to add the alternate security as a
                  party to a lien foreclosure suit within the time required by Subsection (4)(b); or
                      (c) the dismissal with prejudice of the foreclosure suit or suit against the alternate security
                  as to the lien claimant or the entry of judgment against the lien claimant in such a suit.
                      (6) If a copy of the notice of release of lien and substitution of alternate security is not served
                  upon the lien claimant as provided in Subsection (4)(a), the lien claimant shall have six months after
                  the discovery of the notice to commence an action against the alternate security, except that no action

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                  may be commenced against the alternate security after two years from the date the notice was
                  recorded.
                      Section 3. Section 38-1-29 is enacted to read:
                      38-1-29. No waiver of rights.
                      The applicability of the provisions of this chapter, including the waiver of rights or privileges
                  granted under this chapter, may not be varied by agreement.

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