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