Second Substitute H.B. 335

Senator John L. Valentine 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, shall reference the lien sought to be released, and shall have as an
81 attachment a surety bond, letter of credit, or evidence of a cash deposit which:
82 (a) (i) if a surety bond, is executed by a surety company which is treasury listed, A-rated
83 by AM Best Company, and authorized to issue surety bonds 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 by the lien claimant in

88 connection with the 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 the judgment which would have been rendered
91 against the property in the action to enforce the lien together with any costs and attorneys' fees
92 awarded by the court; and
93 (e) has as principal the owner of the interest in the real property, or the original contractor
94 or subcontractor affected by the lien.
95 (3) Upon the recording of the notice of release of lien and substitution of alternate security
96 under Subsection (1), the real property described in the notice shall be released from the
97 mechanics' lien to which the notice applies.
98 (4) (a) Upon the recording of a notice of release of lien and substitution of alternate
99 security under Subsection (1), the person recording the notice shall cause a copy of the notice,
100 together with any attachments, to be served within 30 days upon the lien claimant.
101 (b) If a suit is pending to foreclose the lien at the time the notice is served upon the lien
102 claimant under Subsection (4)(a), the lien claimant shall, within 90 days from the receipt of the
103 notice, institute proceedings to add the alternate security as a party to the lien foreclosure suit.
104 (5) The alternate security attached to a notice of release of lien shall be discharged and
105 released upon:
106 (a) the failure of the lien claimant to commence a suit against the alternate security within
107 the same time as an action to enforce the lien under Section 38-1-11 ;
108 (b) the failure of the lien claimant to institute proceedings to add the alternate security as
109 a party to a lien foreclosure suit within the time required by Subsection (4)(b); or
110 (c) the dismissal with prejudice of the foreclosure suit or suit against the alternate security
111 as to the lien claimant or the entry of judgment against the lien claimant in such a suit.
112 (6) If a copy of the notice of release of lien and substitution of alternate security is not
113 served upon the lien claimant as provided in Subsection (4)(a), the lien claimant shall have six
114 months after the discovery of the notice to commence an action against the alternate security,
115 except that no action may be commenced against the alternate security after two years from the
116 date the notice was recorded.
117 Section 3. Section 38-1-29 is enacted to read:
118 38-1-29. No waiver of rights.

119 The applicability of the provisions of this chapter, including the waiver of rights or
120 privileges granted under this chapter, may not be varied by agreement.