First Substitute H.B. 335

Representative Kevin S. Garn proposes to substitute the following bill:

1 MECHANICS' LIENS AMENDMENTS
2 2001 GENERAL SESSION
3 STATE OF UTAH
4 Sponsor: Kevin S. Garn
5 This act modifies the Mechanics' Lien Act. The act provides for the recording of a notice of
6 release of lien and substitution of alternate security in order to release property encumbered
7 by a mechanics' lien. The act prohibits the variance by agreement of the provisions of the
8 Mechanics' Lien Act.
9 This act affects sections of Utah Code Annotated 1953 as follows:
10 AMENDS:
11 38-1-27, as last amended by Chapter 110, Laws of Utah 1991
12 ENACTS:
13 38-1-28, Utah Code Annotated 1953
14 38-1-29, Utah Code Annotated 1953
15 Be it enacted by the Legislature of the state of Utah:
16 Section 1. Section 38-1-27 is amended to read:
17 38-1-27. Preliminary notice to original contractor -- Form and contents -- Service --
18 Notice of commencement of project or improvement.
19 (1) This section relating to preliminary notices does not apply to residential construction
20 or to work performed in the development of subdivisions whose end use is for residential
21 construction. For the purposes of this section, residential construction means single family
22 detached housing and multifamily attached housing up to and including fourplexes, and includes
23 rental housing.
24 (2) Except subcontractors who are in privity of contract with an original contractor or
25 except for persons performing labor for wages, any person claiming, reserving the right to claim,

26 or intending to claim a mechanic's lien under this chapter for labor, service, equipment, or material
27 shall provide preliminary notice to the original contractor as prescribed by this section. Any
28 person who fails to provide this preliminary notice has no right to claim a mechanic's lien under
29 this chapter.
30 (3) The preliminary notice required by this section shall be in writing and may be given
31 at any time during the course of the project or improvement.
32 (4) A person required by this section to give preliminary notice is only required to give one
33 notice for each project or improvement, which may include an entire structure or a scheme of
34 improvements.
35 (5) If the labor, service, equipment, or material is furnished pursuant to contracts with
36 more than one subcontractor or with more than one original contractor, the notice requirements
37 must be met with respect to the labor, service, equipment, or materials furnished to each such
38 subcontractor or original contractor.
39 (6) The person required by this section to give preliminary notice is precluded from
40 making a claim for any labor, service, equipment, or material which was provided more than 45
41 days prior to the date the preliminary notice is given. The preliminary notice must be given before
42 a notice of lien is filed with the county recorder pursuant to Section 38-1-7 .
43 (7) The preliminary notice under this section shall include:
44 (a) the name, address, and telephone number of the person furnishing the labor, service,
45 equipment, or material;
46 (b) the name and address of the person who contracted for the furnishing of the labor,
47 service, equipment, or material; and
48 (c) the address of the project or improvement or a drawing sufficient to describe the
49 location of the project or improvement.
50 (8) (a) Service of a preliminary notice is sufficient if the notice is deposited in the United
51 States mail, certified or registered, return receipt requested, postage prepaid. Service of the
52 preliminary notice by mail is complete upon deposit of the certified or registered mail.
53 (b) A preliminary notice served by mail may be addressed to the original contractor at his
54 place of business, or his address as shown on the notice of commencement on record with the
55 county recorder as required by Subsection (10).
56 [(9) The applicability of this section, including the waiver of rights or privileges granted

57 or protected by this section, may not be varied by agreement.]
58 [(10)] (9) Any right to assert a defense of failure to comply with the preliminary notice
59 requirements of this section is void unless the original contractor records a notice of
60 commencement of the project or improvement with the county recorder for the county or counties
61 where the project is located within 30 days after commencement of the project. The notice of
62 commencement shall include the following:
63 (a) the name and address of the owner of the project or improvement;
64 (b) the name and address of the original contractor;
65 (c) the name and address of the surety providing any payment bond for the project or
66 improvement, or if none exists, a statement that a payment bond was not required for the work
67 being performed;
68 (d) the name and address of the project; and
69 (e) a legal description of the property on which the project is located.
70 Section 2. Section 38-1-28 is enacted to read:
71 38-1-28. Notice of release of lien and substitution of alternate security.
72 (1) The owner of any interest in real property which is subject to a mechanics' lien
73 recorded under this chapter, or any original contractor or subcontractor affected by the lien, who
74 disputes the correctness or validity of the lien may, either before or after the commencement of an
75 action to enforce the lien, record a notice of release of lien and substitution of alternate security,
76 which meets the requirements of Subsection (2), in the office of the county recorder where the lien
77 was recorded.
78 (2) A notice of release of lien and substitution of alternate security recorded under
79 Subsection (1) shall meet the requirements for the recording of documents in Title 57, Chapter 3,
80 Recording of Documents, and shall have as an attachment a surety bond, letter of credit, or
81 evidence of a cash deposit which:
82 (a) (i) if a surety bond, is executed by a surety company authorized to issue surety bonds
83 in this state; or
84 (ii) if a letter of credit or evidence of a cash deposit, meets the requirements established
85 by rule by the Department of Commerce in accordance with Title 63, Chapter 46a, Utah
86 Administrative Rulemaking Act;
87 (b) is in an amount equal to 150% of the amount claimed in the lien in connection with the

88 parcel of real property sought to be released;
89 (c) is made payable to the lien claimant;
90 (d) is conditioned for the payment of any sum which the lien claimant may recover in the
91 action to enforce the lien together with any costs and attorneys' fees awarded by the court; and
92 (e) has as principal the owner of the interest in the real property, or the original contractor
93 or subcontractor affected by the lien.
94 (3) Upon the recording of the notice of release of lien and substitution of alternate security
95 under Subsection (1), the real property described in the notice shall be released from the
96 mechanics' lien to which the notice applies.
97 Section 3. Section 38-1-29 is enacted to read:
98 38-1-29. No waiver of rights.
99 The applicability of the provisions of this chapter, including the waiver of rights or
100 privileges granted under this chapter, may not be varied by agreement.