Third Substitute H.B. 277

Representative Michael T. Morley proposes the following substitute bill:

1 CONSTRUCTION AMENDMENTS
2 2007 GENERAL SESSION
3 STATE OF UTAH
4 Chief Sponsor: Michael T. Morley
5 Senate Sponsor: Scott K. Jenkins
6
7 LONG TITLE
8 General Description:
9 This bill addresses construction related lien provisions.
10 Highlighted Provisions:
11 This bill:
12 . clarifies the time limits for filing a lien notice;
13 . addresses information and forms required to be provided to the owner of a residence
14 that is the subject of an action to enforce a lien;
15 . addresses the effect of a notice of commencement on earlier work;
16 . exempts wage laborers from filing a preliminary notice with the State Construction
17 Registry;
18 . addresses rights under Title 38, Chapter 11, Residence Lien Restriction and Lien
19 Recovery Fund Act; and
20 . makes technical changes.
21 Monies Appropriated in this Bill:
22 None
23 Other Special Clauses:
24 None
25 Utah Code Sections Affected:

26 AMENDS:
27 38-1-7, as last amended by Chapters 205 and 297, Laws of Utah 2006
28 38-1-11, as last amended by Chapter 297, Laws of Utah 2006
29 38-1-25, as last amended by Chapter 257, Laws of Utah 2001
30 38-1-31, as last amended by Chapter 297, Laws of Utah 2006
31 38-1-32, as last amended by Chapter 297, Laws of Utah 2006
32 38-1-33, as last amended by Chapter 297, Laws of Utah 2006
33 38-11-204, as last amended by Chapter 64, Laws of Utah 2005
34
35 Be it enacted by the Legislature of the state of Utah:
36 Section 1. Section 38-1-7 is amended to read:
37 38-1-7. Notice of claim -- Contents -- Recording -- Service on owner of property.
38 (1) (a) (i) Except as modified in Section 38-1-27 , a person claiming benefits under this
39 chapter shall file for record with the county recorder of the county in which the property, or
40 some part of the property, is situated, a written notice to hold and claim a lien within [90]:
41 (A) 180 days after the [date of] day on which occurs final completion of the original
42 contract [under which the claimant claims a lien under this chapter.] if no notice of completion
43 is filed under Section 38-1-33 ; or
44 (B) 90 days after the day on which a notice of completion is filed under Section
45 38-1-33 .
46 (ii) For purposes of this Subsection (1), final completion of the original contract, and
47 for purposes of Section 38-1-33 , final completion of the project, means:
48 (A) if as a result of work performed under the original contract a permanent certificate
49 of occupancy is required for the work, the date of issuance of a permanent certificate of
50 occupancy by the local government entity having jurisdiction over the construction project;
51 (B) if no certificate of occupancy is required by the local government entity having
52 jurisdiction over the construction project, but as a result of the work performed under the
53 original contract an inspection is required as per state-adopted building codes for the work, the
54 date of the final inspection for the work by the local government entity having jurisdiction over
55 the construction project; or
56 (C) if with regard to work performed under the original contract no certificate of

57 occupancy and no final inspection are required as per state-adopted building codes by the local
58 government entity having jurisdiction over the construction project, the date on which there
59 remains no substantial work to be completed to finish the work on the original contract.
60 (iii) For purposes of this determining final completion, the term "substantial work"
61 does not include:
62 (A) repair work; or
63 (B) warranty work.
64 (b) Notwithstanding Section 38-1-2 , where a subcontractor performs substantial work
65 after the applicable dates established by Subsections (1)(a)(ii)(A) and (B), that subcontractor's
66 subcontract shall be considered an original contract for the sole purpose of determining:
67 (i) the subcontractor's time frame to file a notice of intent to hold and claim a lien
68 under this Subsection (1); and
69 (ii) the original contractor's time frame to file a notice of intent to hold and claim a lien
70 under this Subsection (1) for that subcontractor's work.
71 (c) For purposes of this section, the term "substantial work" does not include:
72 (i) repair work; or
73 (ii) warranty work.
74 (d) Notwithstanding Subsection (1)(a)(ii), final completion of the original contract does
75 not occur if work remains to be completed for which the owner is holding payment to ensure
76 completion of that work.
77 (2) (a) The notice required by Subsection (1) shall contain a statement setting forth:
78 (i) the name of the reputed owner if known or, if not known, the name of the record
79 owner;
80 (ii) the name of the person:
81 (A) by whom the lien claimant was employed; or
82 (B) to whom the lien claimant furnished the equipment or material;
83 (iii) the time when:
84 (A) the first and last labor or service was performed; or
85 (B) the first and last equipment or material was furnished;
86 (iv) a description of the property, sufficient for identification;
87 (v) the name, current address, and current phone number of the lien claimant;

88 (vi) the amount of the lien claim;
89 (vii) the signature of the lien claimant or the lien claimant's authorized agent;
90 (viii) an acknowledgment or certificate as required under Title 57, Chapter 3,
91 Recording of Documents; and
92 (ix) if the lien is on an owner-occupied residence, as defined in Section 38-11-102 , a
93 statement describing what steps an owner, as defined in Section 38-11-102 , may take to require
94 a lien claimant to remove the lien in accordance with Section 38-11-107 .
95 (b) Substantial compliance with the requirements of this chapter is sufficient to hold
96 and claim a lien.
97 (3) (a) Within 30 days after filing the notice of lien, the lien claimant shall deliver or
98 mail by certified mail a copy of the notice of lien to:
99 (i) the reputed owner of the real property; or
100 (ii) the record owner of the real property.
101 (b) If the record owner's current address is not readily available to the lien claimant, the
102 copy of the claim may be mailed to the last-known address of the record owner, using the
103 names and addresses appearing on the last completed real property assessment rolls of the
104 county where the affected property is located.
105 (c) Failure to deliver or mail the notice of lien to the reputed owner or record owner
106 precludes the lien claimant from an award of costs and attorneys' fees against the reputed
107 owner or record owner in an action to enforce the lien.
108 (4) The Division of Occupational and Professional Licensing shall make rules
109 governing the form of the statement required under Subsection (2)(a)(ix).
110 Section 2. Section 38-1-11 is amended to read:
111 38-1-11. Enforcement -- Time for -- Lis pendens -- Action for debt not affected --
112 Instructions and form affidavit and motion.
113 (1) As used in this section:
114 (a) "Owner" is as defined in Section 38-11-102 .
115 (b) "Residence" is as defined in Section 38-11-102 .
116 [(1)] (2) A lien claimant shall file an action to enforce the lien filed under this chapter
117 within 180 days from the day on which the lien claimant filed a notice of claim under Section
118 38-1-7 .

119 [(2)] (3) (a) Within the time period provided for filing in Subsection [(1)] (2) the lien
120 claimant shall file for record with the county recorder of each county in which the lien is
121 recorded a notice of the pendency of the action, in the manner provided in actions affecting the
122 title or right to possession of real property, or the lien shall be void, except as to persons who
123 have been made parties to the action and persons having actual knowledge of the
124 commencement of the action.
125 (b) The burden of proof [shall be] is upon the lien claimant and those claiming under
126 the lien claimant to show actual knowledge under Subsection (3)(a).
127 [(3)] (4) (a) A lien filed under this chapter is automatically and immediately void if an
128 action to enforce the lien is not filed within the time required by this section [ 38-1-11 ].
129 (b) Notwithstanding Section 78-12-40 , a court has no subject matter jurisdiction to
130 adjudicate a lien that becomes void under Subsection [(3)] (4)(a).
131 [(4)] (5) This section may not be interpreted to impair or affect the right of any person
132 to whom a debt may be due for any work done or materials furnished to maintain a personal
133 action to recover the [same] debt.
134 [(5)] (6) (a) If a lien claimant files an action to enforce a lien filed under this chapter
135 involving a residence[, as defined in Section 38-11-102 ], the lien claimant shall include with
136 the service of the complaint on the owner of the residence:
137 (i) instructions to the owner of the residence relating to the owner's rights under Title
138 38, Chapter 11, Residence Lien Restriction and Lien Recovery Fund Act; and
139 (ii) a form [affidavit] to enable the owner of the residence to specify the grounds upon
140 which the owner may exercise available rights under Title 38, Chapter 11, Residence Lien
141 Restriction and Lien Recovery Fund Act.
142 (b) The instructions and form [affidavit] required by Subsection [(5)] (6)(a) shall meet
143 the requirements established by rule by the Division of Occupational and Professional
144 Licensing in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act.
145 (c) If a lien claimant fails to provide to the owner of the residence the instructions and
146 form [affidavit] required by Subsection [(5)] (6)(a), the lien claimant shall be barred from
147 maintaining or enforcing the lien upon the residence.
148 (d) Judicial determination of the rights and liabilities of the owner of the residence
149 under this chapter and Title 38, [Chapters 1 and 11] Chapter 11, Residence Lien Restriction

150 and Lien Recovery Fund Act, and Title 14, Chapter 2, Private Contracts, shall be stayed until
151 after the owner [has been] is given a reasonable period of time to establish compliance with
152 Subsections 38-11-204 (4)(a) and (4)(b) through an informal proceeding, as set forth in Title 63,
153 Chapter 46b, Administrative Procedures Act, commenced within 30 days of the owner being
154 served summons in the foreclosure action, at the Division of Occupational and Professional
155 Licensing and obtain a certificate of compliance or denial of certificate of compliance, as
156 defined in Section 38-11-102 .
157 (e) An owner applying for a certificate of compliance under Subsection [(5)] (6)(d)
158 shall send by certified mail to all lien claimants:
159 (i) a copy of the application for a certificate of compliance; and
160 (ii) all materials filed in connection with the application.
161 (f) The Division of Occupational and Professional Licensing shall notify all lien
162 claimants listed in an owner's application for a certificate of compliance under Subsection [(5)]
163 (6)(d) of the issuance or denial of a certificate of compliance.
164 [(6)] (7) The written notice requirement applies to liens filed on or after July 1, 2004.
165 Section 3. Section 38-1-25 is amended to read:
166 38-1-25. Abuse of lien right -- Penalty.
167 (1) Any person entitled to record or file a lien under Section 38-1-3 is guilty of a class
168 B misdemeanor who intentionally causes a claim of lien against any property[, which contains]
169 containing a greater demand than the sum due to be recorded or filed:
170 (a) with the intent to cloud the title;
171 (b) to exact from the owner or person liable by means of the excessive claim of lien
172 more than is due; or
173 (c) to procure any unjustified advantage or benefit.
174 (2) In addition to any criminal penalties under Subsection (1), a person who violates
175 Subsection (1) is liable to the owner of the property or an original contractor or subcontractor
176 who is affected by the lien for the greater of:
177 (a) twice the amount by which the [wrongful] abusive lien exceeds the amount actually
178 due; or
179 (b) the actual damages incurred by the owner of the property.
180 Section 4. Section 38-1-31 is amended to read:

181 38-1-31. Building permit -- Construction -- Notice registry -- Notice of
182 commencement of work.
183 (1) (a) (i) (A) For a construction project where a building permit is issued to an original
184 contractor or owner-builder, within 15 days after the issuance of the building permit, the local
185 government entity issuing that building permit shall input the building permit application and
186 transmit the building permit information to the database electronically by way of the Internet or
187 computer modem or by any other means [and such].
188 (B) The information [shall form] submitted under Subsection (1)(a)(i)(A) forms the
189 basis of a notice of commencement.
190 (ii) The person to whom a building permit, filed under Subsection (1)(a)(i), is issued is
191 responsible for the accuracy of the information in the building permit.
192 (iii) For the purposes of classifying a record under Title 63, Chapter 2, Government
193 Records Access and Management Act, building permit information transmitted from a local
194 governmental entity to the database shall be classified in the database by the division
195 notwithstanding the local governmental entity's classification of the building permit
196 information.
197 (b) For a construction project where a building permit is not issued, within 15 days
198 after commencement of physical construction work at the project site, the original contractor or
199 owner-builder may file a notice of commencement with the database.
200 (c) If a building permit is issued more than 15 days after commencement of physical
201 construction work at the project site, a notice of commencement based on that building permit
202 is effective only as to a person who did not provide labor, service, equipment, or material
203 before the filing of the notice of commencement.
204 [(c)] (d) An owner of construction or an original contractor may file a notice of
205 commencement with the designated agent within the time prescribed by Subsections (1)(a) and
206 (b).
207 [(d)] (e) (i) If duplicate notices of commencement are filed, they shall be combined into
208 one notice for each project and any notices filed relate back to the date of the earliest-filed
209 notice of commencement for the project.
210 (ii) A duplicate notice of commencement that is untimely filed relates back under
211 Subsection (1)[(d)] (e)(i) if the earlier filed notice of commencement is timely filed.

212 (iii) [On January 1, 2007 and thereafter, duplicate] Duplicate notices of
213 commencement shall be automatically linked by the designated agent.
214 [(e)] (f) The designated agent shall assign each construction project a unique project
215 number that:
216 (i) identifies each construction project; and
217 (ii) can be associated with all notices of commencement, preliminary notices, and
218 notices of completion.
219 [(f)] (g) A notice of commencement is effective only as to any labor, service,
220 equipment, and material furnished to the construction project that is furnished subsequent to
221 the filing of the notice of commencement.
222 (2) (a) [The content of a] A notice of commencement shall include the following:
223 (i) the name and address of the owner of the project;
224 (ii) the name and address of the:
225 (A) original contractor; and
226 (B) surety providing any payment bond for the project, or if none exists, a statement
227 that a payment bond was not required for the work being performed; and
228 (iii) (A) the project address if the project can be reasonably identified by an address; or
229 (B) the name and general description of the location of the project if the project cannot
230 be reasonably identified by an address.
231 (b) A notice of commencement may include:
232 (i) a general description of the project; or
233 (ii) the lot or parcel number, and any subdivision, development, or other project name,
234 of the real property upon which the project is to be constructed if the project is subject to
235 mechanics' liens.
236 (c) [The content of a] A notice of commencement need not include all of the items
237 listed in Subsection (2)(a) if:
238 (i) a building permit is issued for the project; and
239 (ii) all items listed in Subsection (2)(a) that are available on the building permit are
240 included in the notice of commencement.
241 (3) If a notice of commencement for a construction project is not filed within the time
242 set forth in Subsections [ 38-1-31 ](1)(a) and (b), the following do not apply:

243 (a) Section 38-1-32 ; and
244 (b) Section 38-1-33 .
245 (4) (a) Unless a person indicates to the division or designated agent that the person
246 does not wish to receive a notice under this section, electronic notice of the filing of a notice of
247 commencement or alternate notice as prescribed in Subsection (1), shall be provided to:
248 (i) all persons who have filed notices of commencement for the project; and
249 (ii) all interested persons who have requested [such notice for] notices concerning the
250 project.
251 (b) (i) A person to whom notice is required under Subsection (4)(a) is responsible for:
252 (A) providing an e-mail address, mailing address, or telefax number to which a notice
253 required by Subsection (4)(a) is to be sent; and
254 (B) the accuracy of any e-mail address, mailing address, or telefax number to which
255 notice is to be sent.
256 (ii) The designated agent fulfills the notice requirement of Subsection (4)(a) when it
257 sends the notice to the e-mail address, mailing address, or telefax number provided to the
258 designated agent whether or not the notice is actually received.
259 (5) (a) The burden is upon any person seeking to enforce a notice of commencement to
260 verify the accuracy of information in the notice of commencement and prove that the notice of
261 commencement is filed timely and meets all of the requirements in this section.
262 (b) A substantial inaccuracy in a notice of commencement renders the notice of
263 commencement unenforceable.
264 (c) A person filing a notice of commencement by alternate filing is responsible for
265 verifying and changing any incorrect information in the notice of commencement before the
266 expiration of the time period during which the notice is required to be filed.
267 (6) At the time a building permit is obtained, each original contractor shall
268 conspicuously post at the project site a copy of the building permit obtained for the project.
269 Section 5. Section 38-1-32 is amended to read:
270 38-1-32. Preliminary notice by subcontractor.
271 (1) (a) (i) Except for a person who has a contract with an owner or an owner-builder or
272 a laborer compensated with wages, a subcontractor shall file a preliminary notice with the
273 database within the later of:

274 (A) 20 days after commencement of its own work or the commencement of furnishing
275 labor, service, equipment, and material to a construction project; or
276 (B) 20 days after the filing of a notice of commencement.
277 (ii) A preliminary notice filed within the period described in Subsection (1)(a)(i) is
278 effective as to all labor, service, equipment, and material furnished to the construction project,
279 including labor, service, equipment, and material provided to more than one contractor or
280 subcontractor.
281 (iii) (A) If more than one notice of commencement is filed for a project, a person may
282 attach a preliminary notice to any of the notices of commencement filed for the project.
283 (B) A preliminary notice attached to an untimely notice of commencement is valid if
284 there is also a valid and timely notice of commencement for the project to which the
285 preliminary notice may attach.
286 (b) If a person files a preliminary notice after the period prescribed by Subsection
287 (1)(a), the preliminary notice becomes effective five days after the day on which the
288 preliminary notice is filed.
289 (c) [Failure] Except as provided in Subsection (1)(e), failure to file a preliminary notice
290 within the period required by Subsection (1)(a) precludes a person from maintaining any claim
291 for compensation earned for performance of labor or service or supply of materials or
292 equipment furnished to the construction project before the expiration of five days after the late
293 filing of a preliminary notice, except as against the person with whom the person contracted.
294 (d) (i) (A) If a person who is required to file a preliminary notice under this chapter
295 fails to file the preliminary notice, that person may not hold a valid lien under this chapter.
296 (B) A county recorder need not verify that a valid preliminary notice is filed when a
297 person files a notice to hold and claim a lien under Section [ 38-1-17 ] 38-1-7 .
298 (ii) The content of a preliminary notice shall include:
299 (A) the building permit number for the project, or the number assigned to the project
300 by the designated agent;
301 (B) the name, address, and telephone number of the person furnishing the labor,
302 service, equipment, or material;
303 (C) the name and address of the person who contracted with the claimant for the
304 furnishing of the labor, service, equipment, or material;

305 (D) the name of the record or reputed owner of the project;
306 (E) the name of the original contractor under which the claimant is performing or will
307 perform its work; and
308 (F) the address of the project or a description of the location of the project.
309 (iii) Upon request by person identified in Subsection (1)(a)(i), an original contractor
310 shall provide the person with the building permit number for the project, or the number
311 assigned to the project by the designated agent.
312 (e) If a person provides labor, service, equipment, or material before the filing of a
313 notice of commencement and the notice of commencement is filed more than 15 days after the
314 day on which the person providing labor service, equipment, or material begins work on the
315 project, the person providing labor, service, equipment, or material need not file a preliminary
316 notice to maintain the person's right to hold a lien under this chapter or any other right,
317 including a right referenced under Subsection (1)(c).
318 (2) (a) (i) Unless a person indicates to the division or designated agent that the person
319 does not wish to receive a notice under this section, electronic notification of the filing of a
320 preliminary notice or alternate notice as prescribed in Subsection (1), shall be provided to:
321 (A) the person filing the preliminary notice;
322 (B) each person that filed a notice of commencement for the project; and
323 (C) all interested persons who have requested [such notice for] notices concerning the
324 project.
325 (ii) A person to whom notice is required under Subsection (2)(a)(i) is responsible for:
326 (A) providing an e-mail address, mailing address, or telefax number to which a notice
327 required by Subsection (2)(a) is to be sent; and
328 (B) the accuracy of any e-mail address, mailing address, or telefax number to which
329 notice is to be sent.
330 (iii) The designated agent fulfills the notice requirement of Subsection (2)(a)(i) when it
331 sends the notice to the e-mail address, mailing address, or telefax number provided to the
332 designated agent whether or not the notice is actually received.
333 (b) The burden is upon the person filing the preliminary notice to prove that the person
334 has substantially complied with the requirements of this section.
335 (c) Subject to Subsection (1)(d), a person required by this section to give preliminary

336 notice is only required to give one notice for each project.
337 (d) If the labor, service, equipment, or material is furnished pursuant to contracts under
338 more than one original contract, the notice requirements must be met with respect to the labor,
339 service, equipment, or material furnished under each original contract.
340 (3) (a) If a construction project owner, original contractor, subcontractor, or other
341 interested person believes that a preliminary notice has been filed erroneously, that owner,
342 original contractor, subcontractor, or other interested person can request from the person who
343 filed the preliminary notice evidence establishing the validity of the preliminary notice.
344 (b) Within ten days after the request described in Subsection (3)(a), the person or entity
345 that filed the preliminary notice shall provide the requesting person or entity proof that the
346 preliminary notice is valid.
347 (c) If the person or entity that filed the preliminary notice does not provide proof of the
348 validity of the preliminary notice, that person or entity shall immediately cancel the preliminary
349 notice from the database in any manner prescribed by the division pursuant to rule.
350 (4) A person filing a preliminary notice by alternate filing is responsible for verifying
351 and changing any incorrect information in the preliminary notice before the expiration of the
352 time period during which the notice is required to be filed.
353 (5) Until June 1, 2008, nothing in this section affects a person's rights under Title 38,
354 Chapter 11, Residence Lien Restriction and Lien Recovery Fund Act.
355 Section 6. Section 38-1-33 is amended to read:
356 38-1-33. Notice of completion.
357 (1) (a) [(i)] Upon final completion of a construction project:
358 [(A)] (i) an owner of a construction project or an original contractor may file a notice
359 of completion with the database; and
360 [(B)] (ii) a lender that has provided financing for the construction project, a surety that
361 has provided bonding for the construction project, or a title company issuing a title insurance
362 policy on the construction project, may file a notice of completion.
363 [(ii) Final completion, for purposes of this Subsection (1), shall mean:]
364 [(A) if as a result of work performed under the original contract a permanent certificate
365 of occupancy is required for such work, the date of issuance of a permanent certificate of
366 occupancy by the local government entity having jurisdiction over the construction project;]

367 [(B) if no certificate of occupancy is required by the local government entity having
368 jurisdiction over the construction project, but as a result of the work performed under the
369 original contract an inspection is required for such work, the date of the final inspection for
370 such work by the local government entity having jurisdiction over the construction project; or]
371 [(C) if with regard to the work performed under the original contract no certificate of
372 occupancy and no final inspection are required by the local government entity having
373 jurisdiction over the construction project, the date on which there remains no substantial work
374 to be completed to finish such work on the original contract.]
375 (b) Notwithstanding Section 38-1-2 , [where] if a subcontractor performs substantial
376 work after the applicable dates established by Subsections (1)(a)(i) and (ii), that subcontractor's
377