H.B. 234

1

MECHANICS' LIEN AMENDMENTS
2 2002 GENERAL SESSION
3 STATE OF UTAH
4 Sponsor: Kevin S. Garn
5 This act modifies the Mechanics' Lien Act. The act makes a conforming amendment to
6 legislation enacted in the 2001 General Session.
7 This act affects sections of Utah Code Annotated 1953 as follows:
8 AMENDS:
9 38-1-28, as enacted by Chapter 229, Laws of Utah 2001
10 Be it enacted by the Legislature of the state of Utah:
11 Section 1. Section 38-1-28 is amended to read:
12 38-1-28. Notice of release of lien and substitution of alternate security.
13 (1) The owner of any interest in real property which is subject to a mechanics' lien
14 recorded under this chapter, or any original contractor or subcontractor affected by the lien, who
15 disputes the correctness or validity of the lien may, either before or after the commencement of an
16 action to enforce the lien, record a notice of release of lien and substitution of alternate security,
17 which meets the requirements of Subsection (2), in the office of the county recorder where the lien
18 was recorded.
19 (2) A notice of release of lien and substitution of alternate security recorded under
20 Subsection (1) shall meet the requirements for the recording of documents in Title 57, Chapter 3,
21 Recording of Documents, shall reference the lien sought to be released, and shall have as an
22 attachment a surety bond or evidence of a cash deposit which:
23 (a) (i) if a surety bond, is executed by a surety company which is treasury listed, A-rated
24 by AM Best Company, and authorized to issue surety bonds in this state; or
25 (ii) if [a letter of credit or] evidence of a cash deposit, meets the requirements established
26 by rule by the Department of Commerce in accordance with Title 63, Chapter 46a, Utah
27 Administrative Rulemaking Act;

28 (b) is in an amount equal to 150% of the amount claimed by the lien claimant in
29 connection with the parcel of real property sought to be released;
30 (c) is made payable to the lien claimant;
31 (d) is conditioned for the payment of the judgment which would have been rendered
32 against the property in the action to enforce the lien together with any costs and attorneys' fees
33 awarded by the court; and
34 (e) has as principal the owner of the interest in the real property, or the original contractor
35 or subcontractor affected by the lien.
36 (3) Upon the recording of the notice of release of lien and substitution of alternate security
37 under Subsection (1), the real property described in the notice shall be released from the
38 mechanics' lien to which the notice applies.
39 (4) (a) Upon the recording of a notice of release of lien and substitution of alternate
40 security under Subsection (1), the person recording the notice shall cause a copy of the notice,
41 together with any attachments, to be served within 30 days upon the lien claimant.
42 (b) If a suit is pending to foreclose the lien at the time the notice is served upon the lien
43 claimant under Subsection (4)(a), the lien claimant shall, within 90 days from the receipt of the
44 notice, institute proceedings to add the alternate security as a party to the lien foreclosure suit.
45 (5) The alternate security attached to a notice of release of lien shall be discharged and
46 released upon:
47 (a) the failure of the lien claimant to commence a suit against the alternate security within
48 the same time as an action to enforce the lien under Section 38-1-11 ;
49 (b) the failure of the lien claimant to institute proceedings to add the alternate security as
50 a party to a lien foreclosure suit within the time required by Subsection (4)(b); or
51 (c) the dismissal with prejudice of the foreclosure suit or suit against the alternate security
52 as to the lien claimant or the entry of judgment against the lien claimant in such a suit.
53 (6) If a copy of the notice of release of lien and substitution of alternate security is not
54 served upon the lien claimant as provided in Subsection (4)(a), the lien claimant shall have six
55 months after the discovery of the notice to commence an action against the alternate security,
56 except that no action may be commenced against the alternate security after two years from the
57 date the notice was recorded.

Legislative Review Note
as of 1-3-02 11:24 AM

A limited legal review of this legislation raises no obvious constitutional or statutory concerns.

Office of Legislative Research and General Counsel