H.B. 56

             1     

MECHANICS LIEN REVISIONS

             2     
2014 GENERAL SESSION

             3     
STATE OF UTAH

             4     
Chief Sponsor: Mike K. McKell

             5     
Senate Sponsor: ____________

             6     
             7      LONG TITLE
             8      General Description:
             9          This bill amends provisions relating to unauthorized and excessive claims of
             10      preconstruction and construction liens.
             11      Highlighted Provisions:
             12          This bill:
             13          .    provides that a party to a claim for an excessive notice of preconstruction lien or an
             14      excessive notice of construction lien may submit that claim to binding arbitration;
             15          .    creates procedures to initiate, conduct, and appeal an arbitration proceeding to
             16      resolve a claim for an excessive notice of preconstruction lien or an excessive notice
             17      of construction lien;
             18          .    provides that a wrongful lien includes:
             19              .    a preconstruction lien for which the claimant did not file a notice of
             20      preconstruction service under Section 38-1a-401; and
             21              .    a construction lien for which the claimant did not file a preliminary notice under
             22      Section 38-1a-501; and
             23          .    makes technical and conforming changes.
             24      Money Appropriated in this Bill:
             25          None
             26      Other Special Clauses:
             27          None


             28      Utah Code Sections Affected:
             29      AMENDS:
             30           38-1a-308 , as renumbered and amended by Laws of Utah 2012, Chapter 278
             31           38-9-1 , as last amended by Laws of Utah 2010, Chapter 381
             32           38-9-2 , as last amended by Laws of Utah 2012, Chapter 278
             33     
             34      Be it enacted by the Legislature of the state of Utah:
             35          Section 1. Section 38-1a-308 is amended to read:
             36           38-1a-308. Intentional submission of excessive lien notice -- Criminal and civil
             37      liability.
             38          (1) A person is guilty of a class B misdemeanor if:
             39          (a) the person intentionally submits for recording a notice of preconstruction lien or
             40      notice of construction lien against any property containing a greater demand than the sum due;
             41      and
             42          (b) by submitting the notice, the person intends:
             43          (i) to cloud the title;
             44          (ii) to exact from the owner or person liable by means of the excessive notice of
             45      preconstruction or construction lien more than is due; or
             46          (iii) to procure any unjustified advantage or benefit.
             47          (2) (a) As used in this Subsection (2), "third party" means an owner, original
             48      contractor, or subcontractor.
             49          (b) In addition to any criminal penalty under Subsection (1), a person who submits a
             50      notice of preconstruction lien or notice of construction lien as described in Subsection (1) is
             51      liable to a third party who is affected by the [lien] notice of preconstruction lien or the notice of
             52      construction lien for twice the amount by which the [excessive] lien notice exceeds the amount
             53      actually due or the actual damages incurred by the owner, original contractor, or subcontractor,
             54      whichever is greater.
             55          (3) A party to a claim described in Subsection (2)(b) may elect to submit the claim to
             56      arbitration by filing a notice to submit the claim to binding arbitration with the district court in
             57      which the claim was filed if:
             58          (a) the claimant has previously and timely filed a complaint in a district court that


             59      includes a claim described in Subsection (2)(b);
             60          (b) the party files the notice to submit the claim to arbitration no more than 14 days
             61      after the day on which an answer to the complaint is filed; and
             62          (c) the notice to submit the claim to arbitration is filed while the claim is still pending.
             63          (4) (a) A party who elects arbitration under this section may rescind the election in
             64      accordance with Subsection (4)(b) if the rescission is made:
             65          (i) within 90 days after the day on which the party files the notice to submit the claim
             66      to arbitration; and
             67          (ii) no less than 30 days before any scheduled arbitration hearing.
             68          (b) To rescind an election to arbitrate under this Subsection (4), a party shall file a
             69      notice of the rescission of the election to arbitrate with the district court in which the claim was
             70      filed.
             71          (c) All discovery completed in anticipation of the arbitration hearing shall be available
             72      for use by the parties as allowed by the Utah Rules of Civil Procedure and the Utah Rules of
             73      Evidence.
             74          (d) A party who elects to arbitrate under this section and then rescinds the election to
             75      arbitrate under this Subsection (4) may not elect to arbitrate the claim under this section again.
             76          (5) If a party rescinds an election to arbitrate in accordance with Subsection (4),
             77      another party to the claim may elect to submit the claim to arbitration by filing a notice to
             78      submit the claim to binding arbitration with the district court in which the claim was filed if:
             79          (a) the party did not previously submit and rescind an election to arbitrate under this
             80      section;
             81          (b) the notice to submit the claim to arbitration is filed no more than 14 days after the
             82      day on which the notice of rescission of the election to arbitrate is filed by another party; and
             83          (c) the notice to submit the claim to arbitration is filed while the claim is still pending.
             84          (6) (a) Unless otherwise agreed to by the parties, a claim that is submitted to arbitration
             85      under this section shall be resolved by a single arbitrator.
             86          (b) All parties shall agree on the single arbitrator described in Subsection (6)(a) within
             87      60 days after the day on which an answer is filed.
             88          (c) If the parties are unable to agree on a single arbitrator as required under Subsection
             89      (6)(b), the parties shall select a panel of three arbitrators.


             90          (d) If the parties select a panel of three arbitrators under Subsection (6)(c):
             91          (i) each side shall select one arbitrator; and
             92          (ii) the arbitrators selected under Subsection (6)(d)(i) shall select one additional
             93      arbitrator to be included in the panel.
             94          (7) Unless otherwise agreed to in writing:
             95          (a) each party shall pay an equal share of the fees and costs of the arbitrator selected
             96      under Subsection (6)(b); or
             97          (b) if an arbitration panel is selected under Subsection (6)(d):
             98          (i) each party shall pay the fees and costs of that party's selected arbitrator; and
             99          (ii) each party shall pay an equal share of the fees and costs of the arbitrator selected
             100      under Subsection (6)(d)(ii).
             101          (8) Except as otherwise provided in this section or otherwise agreed to by the parties,
             102      an arbitration proceeding conducted under this section shall be governed by Title 78B, Chapter
             103      11, Utah Uniform Arbitration Act.
             104          (9) (a) Subject to the provisions of this section, the Utah Rules of Civil Procedure and
             105      the Utah Rules of Evidence shall apply to an arbitration proceeding under this section.
             106          (b) The Utah Rules of Civil Procedure and the Utah Rules of Evidence shall be applied
             107      liberally with the intent of resolving the claim in a timely and cost-efficient manner.
             108          (c) Subject to the provisions of this section, discovery shall be conducted in accordance
             109      with Rules 26 through 37 of the Utah Rules of Civil Procedure and shall be subject to the
             110      jurisdiction of the district court in which the claim is filed.
             111          (d) Unless otherwise agreed to by the parties or ordered by the court, discovery in an
             112      arbitration proceeding under this section shall be limited to the discovery available in a tier 1
             113      case under Rule 26, of the Utah Rules of Civil Procedure.
             114          (10) A written decision by a single arbitrator or by a majority of the arbitration panel
             115      shall constitute a final decision.
             116          (11) An arbitration award issued under this section shall be the final resolution of all
             117      excessive notice claims described in Subsection (1) between the parties and may be reduced to
             118      judgment by the court upon motion and notice unless:
             119          (a) either party, within 20 days after the day on which the arbitration award is served,
             120      files a notice requesting a trial de novo in the district court in which the claim was filed; or


             121          (b) the arbitration award has been satisfied.
             122          (12) Upon filing a notice requesting a trial de novo under Subsection (11):
             123          (a) unless otherwise stipulated to by the parties or ordered by the court, the parties are
             124      allowed an additional 60 days for discovery;
             125          (b) the additional discovery time described in Subsection (12)(a)(i) shall run from the
             126      day on which the notice requesting a trial de novo is filed; and
             127          (c) the claim shall proceed through litigation pursuant to the Utah Rules of Civil
             128      Procedure and the Utah Rules of Evidence in the district court.
             129          (13) If the plaintiff, as the moving party in a trial de novo requested under Subsection
             130      (11), does not obtain a verdict that is at least 30% greater than the arbitration award, the
             131      plaintiff is responsible for all of the nonmoving party's costs, including expert witness fees.
             132          (14) If a defendant, as the moving party in a trial de novo requested under Subsection
             133      (11), does not obtain a verdict that is at least 30% less than the arbitration award, the defendant
             134      is responsible for all of the nonmoving party's costs, including expert witness fees.
             135          (15) If a district court determines, upon a motion of the nonmoving party, that the
             136      moving party's use of the trial de novo process was filed in bad faith, as defined in Section
             137      78B-5-825 , the district court may award reasonable attorney fees to the nonmoving party.
             138          (16) All arbitration awards issued under this section shall bear postjudgment interest
             139      pursuant to Section 15-1-4 .
             140          Section 2. Section 38-9-1 is amended to read:
             141           38-9-1. Definitions.
             142          As used in this chapter:
             143          (1) "Interest holder" means a person who holds or possesses a present, lawful property
             144      interest in certain real property, including an owner, title holder, mortgagee, trustee, or
             145      beneficial owner.
             146          (2) "Lien claimant" means a person claiming an interest in real property who offers a
             147      document for recording or filing with any county recorder in the state asserting a lien, or notice
             148      of interest, or other claim of interest in [certain] real property.
             149          (3) "Owner" means a person who has a vested ownership interest in certain real
             150      property.
             151          (4) (a) "Record interest holder" means a person who holds or possesses a present,


             152      lawful property interest in [certain] real property, including an owner, titleholder, mortgagee,
             153      trustee, or beneficial owner, and whose name and interest in that real property appears in the
             154      county recorder's records for the county in which the property is located.
             155          (b) "Record interest holder" includes any grantor in the chain of the title in [certain]
             156      real property.
             157          (5) "Record owner" means an owner whose name and ownership interest in certain real
             158      property is recorded or filed in the county recorder's records for the county in which the
             159      property is located.
             160          (6) (a) "Wrongful lien" means any document that purports to create a lien, notice of
             161      interest, or encumbrance on an owner's interest in certain real property and at the time it is
             162      recorded is not:
             163          [(a)] (i) expressly authorized by this chapter or another state or federal statute;
             164          [(b)] (ii) authorized by or contained in an order or judgment of a court of competent
             165      jurisdiction in the state; or
             166          [(c)] (iii) signed by or authorized pursuant to a document signed by the owner of the
             167      real property.
             168          (b) "Wrongful lien" includes:
             169          (i) a preconstruction lien for which the claimant did not file a notice of preconstruction
             170      service under Section 38-1a-401 ; and
             171          (ii) a construction lien for which the claimant did not file a preliminary notice under
             172      Section 38-1a-501 .
             173          Section 3. Section 38-9-2 is amended to read:
             174           38-9-2. Scope.
             175          [(1) (a) The provisions of Sections 38-9-1 , 38-9-3 , 38-9-4 , and 38-9-6 apply to any
             176      recording or filing or any rejected recording or filing of a lien pursuant to this chapter on or
             177      after May 5, 1997.]
             178          [(b) The provisions of Sections 38-9-1 and 38-9-7 apply to all liens of record regardless
             179      of the date the lien was recorded or filed.]
             180          [(c)] (1) [Notwithstanding Subsections (1)(a) and (b), the provisions of this] This
             181      chapter [applicable to the filing of a notice of interest do] does not apply to a notice of interest
             182      filed before May 5, 2008.


             183          (2) [The provisions of this chapter shall not prevent a person from filing] This chapter
             184      does not apply to a lis pendens recorded in accordance with Section 78B-6-1303 [or] and does
             185      not prevent a person from seeking any other relief permitted by law.
             186          (3) This chapter does not apply to a person entitled to a preconstruction or construction
             187      lien [under], as described in Section 38-1a-301 , who:
             188          (a) (i) files a notice of preconstruction service under Section 38-1a-401 ; or
             189          (ii) files a preliminary notice under Section 38-1a-501 ; and
             190          (b) [files] records a lien [pursuant to] that corresponds to a notice described in
             191      Subsection (3)(a)(i) or (ii), in accordance with Title 38, Chapter 1a, Preconstruction and
             192      Construction Liens.




Legislative Review Note
    as of 12-30-13 1:20 PM


Office of Legislative Research and General Counsel


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