H.B. 273 Enrolled

REAL ESTATE AND MECHANICS LIENS -
SECURITY ALTERNATIVES
2005 GENERAL SESSION
STATE OF UTAH
Chief Sponsor: Michael T. Morley
Senate Sponsor: Thomas V. Hatch

LONG TITLE
General Description:
This bill addresses provisions related to the substitution of alternate security for certain
liens.
Highlighted Provisions:
This bill:
. addresses the recording of a notice of release of lien and substitution of alternate
security;
. addresses the amount of the bond required for a substitution of alternate security;
. clarifies that a notice of release of lien and substitution of alternate security remains
in effect when a lien is amended if the bond amount remains at the appropriate
amount; and
. makes technical changes.
Monies Appropriated in this Bill:
None
Other Special Clauses:
None
Utah Code Sections Affected:
AMENDS:
38-1-28, as last amended by Chapter 44, Laws of Utah 2002

Be it enacted by the Legislature of the state of Utah:

Section 1. Section 38-1-28 is amended to read:
38-1-28. Notice of release of lien and substitution of alternate security.
(1) The owner of any interest in real property [which] that is subject to a mechanics' lien
recorded under this chapter, or any original contractor or subcontractor affected by the lien, who
disputes the correctness or validity of the lien may[, either before or after the commencement of
an action to enforce the lien,] record a notice of release of lien and substitution of alternate
security[, which]:
(a) that meets the requirements of Subsection (2)[,];
(b) in the office of the county recorder where the lien was recorded[.]; and
(c) at any time before the expiration of 90 days after the day on which the person filing a
notice of release of lien and substitution of alternate security is served with a summons and lien
foreclosure complaint.
(2) A notice of release of lien and substitution of alternate security recorded under
Subsection (1) shall:
(a) meet the requirements for the recording of documents in Title 57, Chapter 3,
Recording of Documents[, shall];
(b) reference the lien sought to be released, including an entry number, book number, and
page number; and [shall]
(c) have as an attachment a surety bond or evidence of a cash deposit [which] that:
[(a)] (i) (A) if a surety bond, is executed by a surety company [which] that is treasury
listed, A-rated by AM Best Company, and authorized to issue surety bonds in this state; or
[(ii)] (B) if evidence of a cash deposit, meets the requirements established by rule by the
Department of Commerce in accordance with Title 63, Chapter 46a, Utah Administrative
Rulemaking Act;
[(b)] (ii) is in an amount equal to [150% of the amount claimed by the lien claimant in
connection with the parcel of real property sought to be released;]:
(A) 150% of the amount claimed by the lien claimant on a notice of lien or determined
under Subsection (7), if the lien claim is for $25,000 or more;

(B) 175% of the amount claimed by the lien claimant on a notice of lien or determined
under Subsection (7), if the lien claim is for at least $15,000 but less than $25,000; or
(C) 200% of the amount claimed by the lien claimant on a notice of lien or determined
under Subsection (7), if the lien claim is for less than $15,000;
[(c)] (iii) is made payable to the lien claimant;
[(d)] (iv) is conditioned for the payment of:
(A) the judgment [which] that would have been rendered, or has been rendered against
the property in the action to enforce the lien [together with]; and
(B) any costs and attorneys' fees awarded by the court; and
[(e)] (v) has as principal:
(A) the owner of the interest in the real property[,]; or
(B) the original contractor or subcontractor affected by the lien.
(3) (a) Upon the recording of the notice of release of lien and substitution of alternate
security under Subsection (1), the real property described in the notice shall be released from the
mechanics' lien to which the notice applies.
(b) A recorded notice of release of lien and substitution of alternate security is effective
as to any amendment to the lien being released if the bond amount remains enough to satisfy the
requirements of Subsection (2)(c)(ii).
(4) (a) Upon the recording of a notice of release of lien and substitution of alternate
security under Subsection (1), the person recording the notice shall [cause] serve a copy of the
notice, together with any attachments, [to be served] within 30 days upon the lien claimant.
(b) If a suit is pending to foreclose the lien at the time the notice is served upon the lien
claimant under Subsection (4)(a), the lien claimant shall, within 90 days from the receipt of the
notice, institute proceedings to add the alternate security as a party to the lien foreclosure suit.
(5) The alternate security attached to a notice of release of lien shall be discharged and
released upon:
(a) the failure of the lien claimant to commence a suit against the alternate security
within the same time as an action to enforce the lien under Section 38-1-11 ;

(b) the failure of the lien claimant to institute proceedings to add the alternate security as
a party to a lien foreclosure suit within the time required by Subsection (4)(b); [or]
(c) the dismissal with prejudice of the lien foreclosure suit or suit against the alternate
security as to the lien claimant; or
(d) the entry of judgment against the lien claimant in [such a suit.]:
(i) a lien foreclosure suit; or
(ii) suit against the alternate security.
(6) If a copy of the notice of release of lien and substitution of alternate security is not
served upon the lien claimant as provided in Subsection (4)(a), the lien claimant shall have six
months after the discovery of the notice to commence an action against the alternate security,
except that no action may be commenced against the alternate security after two years from the
date the notice was recorded.
(7) (a) The owner of any interest in real property that is subject to a mechanics' lien
recorded under this chapter or an original contractor or subcontractor affected by a mechanics'
lien recorded under this chapter who disputes the amount claimed in a notice of lien may petition
the district court in the county in which the notice of lien is recorded for a summary
determination of the correct amount of a lien claim for the sole purpose of providing alternate
security.
(b) A petition under this Subsection (7) shall:
(i) state with specificity the factual and legal bases for disputing the amount of the lien
claim; and
(ii) be supported by a sworn affidavit and any other evidence supporting the petition.
(c) A petitioner under Subsection (7)(a) shall, under Utah Rules of Civil Procedure, Rule
4, serve on the lien claimant:
(i) a copy of the petition; and
(ii) a notice of hearing if a hearing is scheduled.
(d) If a court finds a petition under Subsection (7)(a) insufficient, the court may dismiss
the petition without a hearing.

(e) If a court finds a petition under Subsection (7)(a) sufficient, the court shall schedule a
hearing within ten days to determine the correct amount of the lien claim for the sole purpose of
providing alternate security.
(f) A lien claimant may:
(i) attend a hearing held under this Subsection (7); and
(ii) contest the petition.
(g) A determination under this section is limited to a determination of the amount of the
lien claim for the sole purpose of providing alternate security and does not conclusively establish:
(i) the amount to which the lien claimant is entitled;
(ii) the validity of the lien claim; or
(iii) any person's right to any other legal remedy.
(h) If a court, in a proceeding under this Subsection (7), determines that the amount
claimed in a notice of claim is excessive, the court shall set the amount of the lien claim for the
sole purpose of providing alternate security.
(i) In an order under Subsection (7)(h), the court shall include a legal description of the
property.
(j) A petitioner under this Subsection (7) may record a certified copy of any order issued
under this Subsection (7) in the county in which the lien is recorded.
(k) Attorneys' fees may not be awarded for a proceeding under this Subsection (7), but
shall be considered in any award of attorneys' fees under any other provision of this chapter.