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S.B. 118 Enrolled

             1     

MECHANICS' LIEN AND PAYMENT
             2      AMENDMENTS
             3      2007 GENERAL SESSION
             4      STATE OF UTAH
             5      Chief Sponsor: Scott K. Jenkins
             6      House Sponsor: Michael T. Morley
             7     
             8      LONG TITLE
             9      General Description:
             10          This bill makes changes to a provision related to waiving mechanics' lien rights.
             11      Highlighted Provisions:
             12          This bill:
             13          .    defines the term "receives payment";
             14          .    allows the use of waiver language different from the statutory language;
             15          .    unifies language used for a restrictive endorsement that waives a mechanics' lien
             16      right;
             17          .    removes provisions from the statutory waiver form concerning disputed claims;
             18          .    addresses the effect of failure to comply with lien waiver requirements; and
             19          .    makes technical changes.
             20      Monies Appropriated in this Bill:
             21          None
             22      Other Special Clauses:
             23          None
             24      Utah Code Sections Affected:
             25      AMENDS:
             26          38-1-39, as enacted by Chapter 203, Laws of Utah 2006
             27     
             28      Be it enacted by the Legislature of the state of Utah:
             29          Section 1. Section 38-1-39 is amended to read:

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             30           38-1-39. Waiver or impairment of a lien right -- Forms -- Scope.
             31          (1) As used in this section:
             32          (a) "Check" means a payment instrument on a depository institution including:
             33          (i) a check;
             34          (ii) a draft;
             35          (iii) an order; or
             36          (iv) other instrument.
             37          (b) "Depository institution" is as defined in Section 7-1-103 .
             38          (c) "Lien claimant" means a person that claims a lien under this chapter.
             39          (d) "Receives payment" means, in the case of a restrictive endorsement, a payee has
             40      endorsed a check and the check is presented to and paid by the depository institution on which
             41      it is drawn.
             42          (2) Notwithstanding Section 38-1-29 , a written consent given by a lien claimant that
             43      waives or limits the lien claimant's lien rights is enforceable only if the lien claimant:
             44          (a) (i) executes a waiver and release that is[:(A)] signed by the lien claimant or the lien
             45      claimant's authorized agent; [and] or
             46          [(B) substantially in the form set forth in Subsection (4); or]
             47          (ii) for a restrictive endorsement on a check, includes a restrictive endorsement on a
             48      check that is:
             49          (A) signed by the lien claimant or the lien claimant's authorized agent; and
             50          (B) in substantially the same form set forth in Subsection (4)(d); and
             51          (b) receives payment of the amount identified in the waiver and release or check that
             52      includes the restrictive endorsement:
             53          (i) including payment by a joint payee check; and
             54          (ii) for a progress payment, only to the extent of the payment.
             55          (3) (a) Notwithstanding the language of a waiver and release described in Subsection
             56      (2), Subsection (3)(b) applies if:
             57          (i) the payment given in exchange for any waiver and release of lien is made by check;

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             58      and
             59          (ii) the check fails to clear the depository institution on which it is drawn for any
             60      reason.
             61          (b) If the conditions of Subsection (3)(a) are met:
             62          (i) the waiver and release described in Subsection (3)(a) is null, void, and of no legal
             63      effect; and
             64          (ii) the following will not be affected by the lien claimant's execution of the waiver and
             65      release:
             66          (A) any lien;
             67          (B) any lien right;
             68          (C) any bond right;
             69          (D) any contract right; or
             70          (E) any other right to recover payment afforded to the lien claimant in law or equity.
             71          (4) (a) A waiver and release given by a lien claimant meets the requirements of this
             72      section if it is in substantially the form provided in this Subsection (4) for the circumstance
             73      provided in this Subsection (4).
             74          [(a) (i)] (b) A waiver and release may be in substantially the following form if the lien
             75      claimant is required to execute a waiver and release in exchange for or to induce the payment
             76      of a progress billing:
             77      "UTAH CONDITIONAL WAIVER AND RELEASE UPON PROGRESS PAYMENT
             78      Property Name: _____________________________________________________________
             79      Property Location: ___________________________________________________________
             80      Undersigned's Customer: _____________________________________________________
             81      Invoice/Payment Application Number: __________________________________________
             82      Payment Amount: ___________________________________________________________
             83      Payment Period: ____________________________________________________________
             84          To the extent provided below, this document becomes effective to release and the
             85      undersigned is considered to waive any notice of lien or right under Utah Code Ann., Title 38,

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             86      Chapter 1, Mechanics' Liens, or any bond right under Utah Code Ann., Title 14, Contractors'
             87      Bonds, or Section 63-56-504 related to payment rights the undersigned has on the above
             88      described Property once:
             89          (1) the undersigned [receives] endorses a check in the above referenced Payment
             90      Amount payable to the undersigned; and
             91          [(2) the check is properly endorsed; and]
             92          [(3)] (2) the check is paid by the depository institution on which it is drawn.
             93          This waiver and release applies to a progress payment for the work, materials,
             94      equipment, or a combination of work, materials, and equipment furnished by the undersigned
             95      to the Property or to the Undersigned's Customer which are the subject of the Invoice or
             96      Payment Application, but only to the extent of the Payment Amount. This waiver and release
             97      does not apply to any retention withheld; any items, modifications, or changes pending
             98      approval; disputed items and claims; or items furnished or invoiced after the Payment Period.
             99          The undersigned warrants that the undersigned either has already paid or will use the
             100      money the undersigned receives from this progress payment promptly to pay in full all the
             101      undersigned's laborers, subcontractors, materialmen, and suppliers for all work, materials,
             102      equipment, or combination of work, materials, and equipment that are the subject of this
             103      waiver and release.
             104      Dated: ________________________
             105      ___________________________________________________________(Company Name)
             106      _____________________________________________________By:__________________
             107      _____________________________________________________Its:__________________"
             108          [(ii) A restrictive endorsement placed on a check to effectuate a waiver and release
             109      described in this Subsection (4)(a) meets the requirements of this section if it is in substantially
             110      the following form:]
             111          ["This check is a progress payment for (property description sufficient for
             112      identification). Endorsement of this check is an acknowledgment by the endorser that the
             113      waiver and release to which the payment applies is effective to the extent provided in Utah

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             114      Code Ann. Subsection 38-1-39 (4)(a)."]
             115          [(b) (i)] (c) A waiver and release may be in substantially the following form if the lien
             116      claimant is required to execute a waiver and release in exchange for or to induce the payment
             117      of a final billing:
             118      "UTAH [CONDITIONAL] WAIVER AND RELEASE UPON FINAL PAYMENT
             119      Property Name: ____________________________________________________________
             120      Property Location: __________________________________________________________
             121      Undersigned's Customer: _____________________________________________________
             122      Invoice/Payment Application Number: __________________________________________
             123      Payment Amount: ___________________________________________________________
             124      [Amount of Disputed Claims:___________________________________________________]
             125          To the extent provided below, this document becomes effective to release and the
             126      undersigned is considered to waive any notice of lien or right under Utah Code Ann., Title 38,
             127      Chapter 1, Mechanics' Liens, or any bond right under Utah Code Ann., Title 14, Contractors'
             128      Bonds, or Section 63-56-504 related to payment rights the undersigned has on the above
             129      described Property once:
             130          (1) the undersigned [receives] endorses a check in the above referenced Payment
             131      Amount payable to the undersigned; and
             132          [(2) the check is properly endorsed; and]
             133          [(3)] (2) the check is paid by the depository institution on which it is drawn.
             134          This waiver and release applies to the final payment for the work, materials, equipment,
             135      or combination of work, materials, and equipment furnished by the undersigned to the Property
             136      or to the Undersigned's Customer. [This waiver and release does not apply to payment of
             137      Disputed Claims, if any.]
             138          The undersigned warrants that the undersigned either has already paid or will use the
             139      money the undersigned receives from the final payment promptly to pay in full all the
             140      undersigned's laborers, subcontractors, materialmen, and suppliers for all work, materials,
             141      equipment, or combination of work, materials, and equipment that are the subject of this

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             142      waiver and release.
             143      Dated: ________________________
             144      ___________________________________________________________(Company Name)
             145      _____________________________________________________By:__________________
             146      _____________________________________________________Its:__________________"
             147          [(ii)] (d) A restrictive endorsement placed on a check to effectuate a waiver and release
             148      described in this Subsection (4)[(b)] meets the requirements of this section if it is in
             149      substantially the following form:
             150          "This check is a progress/ final payment for [(]property [description] described on this
             151      check sufficient for identification[)]. Endorsement of this check is an acknowledgment by the
             152      endorser that the waiver and release to which the payment applies is effective to the extent
             153      provided in Utah Code Ann. Subsection 38-1-39 (4)(b) or (c) respectively."
             154          (e) (i) If using a restrictive endorsement under Subsection (4)(d), the person preparing
             155      the check shall indicate whether the check is for a progress payment or a final payment by
             156      circling the word "progress" if the check is for a progress payment, or the word "final" if the
             157      check is for a final payment.
             158          (ii) If a restrictive endorsement does not indicate whether the check is for a progress
             159      payment or a final payment, it is considered to be for a progress payment.
             160          (5) (a) If the conditions of Subsection (5)(b) are met, this section does not affect the
             161      enforcement of:
             162          (i) an accord and satisfaction regarding a bona fide dispute; or
             163          (ii) an agreement made in settlement of an action pending in any court or arbitration.
             164          (b) Pursuant to Subsection (5)(a), this section does not affect enforcement of an accord
             165      and satisfaction or settlement described in Subsection (5)(a) if the accord and satisfaction or
             166      settlement:
             167          (i) is in a writing signed by the lien claimant; and
             168          (ii) specifically references the lien rights waived or impaired.
             169          [(6) A lien waiver or lien release that is not substantially similar to the forms set forth

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             170      in Subsection (4) is not enforceable under Section 38-1-29 .]

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