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S.B. 256 Enrolled

             1     

PRECONSTRUCTION AND CONSTRUCTION LIENS

             2     
AMENDMENTS

             3     
2013 GENERAL SESSION

             4     
STATE OF UTAH

             5     
Chief Sponsor: Scott K. Jenkins

             6     
House Sponsor: Brad R. Wilson

             7     
             8      LONG TITLE
             9      General Description:
             10          This bill amends Title 38, Chapter 1a, Preconstruction and Construction Liens.
             11      Highlighted Provisions:
             12          This bill:
             13          .    changes the name of a notice of retention described in Section 38-1a-401 to a notice
             14      of preconstruction service;
             15          .    provides that all preconstruction liens on a project property are on equal footing;
             16      and
             17          .    makes technical changes.
             18      Money Appropriated in this Bill:
             19          None
             20      Other Special Clauses:
             21          None
             22      Utah Code Sections Affected:
             23      AMENDS:
             24          38-1a-102, as renumbered and amended by Laws of Utah 2012, Chapter 278
             25          38-1a-204, as enacted by Laws of Utah 2012, Chapter 278
             26          38-1a-306, as enacted by Laws of Utah 2012, Chapter 278
             27          38-1a-401, as renumbered and amended by Laws of Utah 2012, Chapter 278
             28          38-1a-402, as renumbered and amended by Laws of Utah 2012, Chapter 278
             29          38-1a-403, as renumbered and amended by Laws of Utah 2012, Chapter 278


             30      ENACTS:
             31          38-1a-405, Utah Code Annotated 1953
             32     
             33      Be it enacted by the Legislature of the state of Utah:
             34          Section 1. Section 38-1a-102 is amended to read:
             35           38-1a-102. Definitions.
             36          As used in this chapter:
             37          (1) "Alternate means" means a method of filing a legible and complete notice or other
             38      document with the registry other than electronically, as established by the division by rule.
             39          (2) "Anticipated improvement" means the improvement:
             40          (a) for which preconstruction service is performed; and
             41          (b) that is anticipated to follow the performing of preconstruction service.
             42          (3) "Applicable county recorder" means the office of the recorder of each county in
             43      which any part of the property on which a claimant claims or intends to claim a preconstruction
             44      or construction lien is located.
             45          (4) "Bona fide loan" means a loan to an owner or owner-builder by a lender in which
             46      the owner or owner-builder has no financial or beneficial interest greater than 5% of the voting
             47      shares or other ownership interest.
             48          (5) "Claimant" means a person entitled to claim a preconstruction or construction lien.
             49          (6) "Compensation" means the payment of money for a service rendered or an expense
             50      incurred, whether based on:
             51          (a) time and expense, lump sum, stipulated sum, percentage of cost, cost plus fixed or
             52      percentage fee, or commission; or
             53          (b) a combination of the bases listed in Subsection (6)(a).
             54          (7) "Construction lien" means a lien under this chapter for construction work.
             55          (8) "Construction loan" does not include a consumer loan secured by the equity in the
             56      consumer's home.
             57          (9) "Construction project" means construction work provided under an original


             58      contract.
             59          (10) "Construction work":
             60          (a) means labor, service, material, or equipment provided for the purpose and during
             61      the process of constructing, altering, or repairing an improvement; and
             62          (b) includes scheduling, estimating, staking, supervising, managing, materials testing,
             63      inspection, observation, and quality control or assurance involved in constructing, altering, or
             64      repairing an improvement.
             65          (11) "Contestable notice" means a notice of [retention] preconstruction service under
             66      Section 38-1a-401 , a preliminary notice under Section 38-1a-501 , or a notice of completion
             67      under Section 38-1a-506 .
             68          (12) "Contesting person" means an owner, original contractor, subcontractor, or other
             69      interested person.
             70          (13) "Designated agent" means the third party the division contracts with as provided
             71      in Section 38-1a-202 to create and maintain the registry.
             72          (14) "Division" means the Division of Occupational and Professional Licensing created
             73      in Section 58-1-103 .
             74          (15) "Entry number" means the reference number that:
             75          (a) the designated agent assigns to each notice or other document filed with the
             76      registry; and
             77          (b) is unique for each notice or other document.
             78          (16) "Final completion" means:
             79          (a) the date of issuance of a permanent certificate of occupancy by the local
             80      government entity having jurisdiction over the construction project, if a permanent certificate
             81      of occupancy is required;
             82          (b) the date of the final inspection of the construction work by the local government
             83      entity having jurisdiction over the construction project, if an inspection is required under a
             84      state-adopted building code applicable to the construction work, but no certificate of occupancy
             85      is required;


             86          (c) unless the owner is holding payment to ensure completion of construction work, the
             87      date on which there remains no substantial work to be completed to finish the construction
             88      work under the original contract, if a certificate of occupancy is not required and a final
             89      inspection is not required under an applicable state-adopted building code; or
             90          (d) the last date on which substantial work was performed under the original contract,
             91      if, because the original contract is terminated before completion of the construction work
             92      defined by the original contract, the local government entity having jurisdiction over the
             93      construction project does not issue a certificate of occupancy or perform a final inspection.
             94          (17) "First preliminary notice filing" means the filing of a preliminary notice that is:
             95          (a) the earliest preliminary notice filed on a construction project;
             96          (b) filed on or after August 1, 2011;
             97          (c) not filed on a project that, according to the law in effect before August 1, 2011,
             98      commenced before August 1, 2011;
             99          (d) not canceled under Section 38-1a-307 ; and
             100          (e) not withdrawn under Subsection 38-1a-501 (5).
             101          (18) "Government project-identifying information" has the same meaning as defined in
             102      Section 38-1b-102 .
             103          (19) "Improvement" means:
             104          (a) a building, infrastructure, utility, or other human-made structure or object
             105      constructed on or for and affixed to real property; or
             106          (b) a repair, modification, or alteration of a building, infrastructure, utility, or object
             107      referred to in Subsection (19)(a).
             108          (20) "Interested person" means a person [who] that may be affected by a construction
             109      project.
             110          (21) "Notice of commencement" means a notice required under Section 38-1b-201 for
             111      a government project, as defined in Section 38-1b-102 .
             112          (22) "Original contract":
             113          (a) means a contract between an owner and an original contractor for preconstruction


             114      service or construction work; and
             115          (b) does not include a contract between an owner-builder and another person.
             116          (23) "Original contractor" means a person [who] that contracts with an owner, other
             117      than an owner-builder, to provide preconstruction service or construction work.
             118          (24) "Owner" means the person [who] that owns the project property.
             119          (25) "Owner-builder" means an owner who:
             120          (a) contracts with one or more other persons for preconstruction service or construction
             121      work for an improvement on the owner's real property; and
             122          (b) obtains a building permit for the improvement.
             123          (26) "Preconstruction service":
             124          (a) means to plan or design, or to assist in the planning or design of, an improvement or
             125      a proposed improvement:
             126          (i) before construction of the improvement commences; and
             127          (ii) for compensation separate from any compensation paid or to be paid for
             128      construction work for the improvement; and
             129          (b) includes consulting, conducting a site investigation or assessment, programming,
             130      preconstruction cost or quantity estimating, preconstruction scheduling, performing a
             131      preconstruction construction feasibility review, procuring construction services, and preparing
             132      a study, report, rendering, model, boundary or topographic survey, plat, map, design, plan,
             133      drawing, specification, or contract document.
             134          (27) "Preconstruction lien" means a lien under this chapter for a preconstruction
             135      service.
             136          (28) "Prelender claimant" means a person whose construction lien is made subject to a
             137      construction lender's mortgage or trust deed, as provided in Section 38-1a-503 , by the person's
             138      acceptance of payment in full and the person's withdrawal of the person's preliminary notice.
             139          (29) "Private project" means a construction project that is not a government project.
             140          (30) "Project property" means the real property on or for which preconstruction service
             141      or construction work is or will be provided.


             142          (31) "Refiled preliminary notice" means a preliminary notice that a prelender claimant
             143      files with the registry on a construction project after withdrawing a preliminary notice that the
             144      claimant previously filed for the same project.
             145          (32) "Registry" means the State Construction Registry under Part 2, State Construction
             146      Registry.
             147          (33) "Required notice" means:
             148          (a) a notice of [retention] preconstruction service under Section 38-1a-401 ;
             149          (b) a preliminary notice under Section 38-1a-501 or Section 38-1b-202 ;
             150          (c) a notice of commencement;
             151          (d) a notice of construction loan under Section 38-1a-601 ;
             152          (e) a notice under Section 38-1a-602 concerning a construction loan default;
             153          (f) a notice of intent to obtain final completion under Section 38-1a-506 ; or
             154          (g) a notice of completion under Section 38-1a-507 .
             155          (34) "Subcontractor" means a person [who] that contracts to provide preconstruction
             156      service or construction work to:
             157          (a) a person other than the owner; or
             158          (b) the owner, if the owner is an owner-builder.
             159          (35) "Substantial work" does not include repair work or warranty work.
             160          (36) "Supervisory subcontractor" means a person [who] that:
             161          (a) is a subcontractor under contract to provide preconstruction service or construction
             162      work; and
             163          (b) contracts with one or more other subcontractors for the other subcontractor or
             164      subcontractors to provide preconstruction service or construction work that the person is under
             165      contract to provide.
             166          Section 2. Section 38-1a-204 is amended to read:
             167           38-1a-204. Notification of filings with the registry.
             168          (1) The designated agent shall provide notification of the filing of a required notice
             169      relating to an anticipated improvement or construction project to:


             170          (a) the person filing the required notice, unless the person indicates to the division or
             171      designated agent that the person does not want to receive notification; and
             172          (b) each person [who] that requests notification of the filing of a required notice for
             173      that anticipated improvement or construction project.
             174          (2) (a) A person may request the designated agent to provide the person notification of
             175      the filing of a required notice for any anticipated improvement or construction project.
             176          (b) A person requesting notification under Subsection (2)(a) is responsible:
             177          (i) to provide an email address, mailing address, or telefax number to which
             178      notification may be sent; and
             179          (ii) for the accuracy of the email address, mailing address, or telefax number.
             180          (c) A person is considered to have requested notification under Subsection (2)(a) if the
             181      person files, with respect to the same anticipated improvement or construction project that
             182      relates to the required notice that is the subject of the notification:
             183          (i) a notice of [retention] preconstruction service;
             184          (ii) a notice of commencement;
             185          (iii) a preliminary notice;
             186          (iv) a notice of construction loan; or
             187          (v) a notice of completion.
             188          (3) The designated agent fulfills the notification requirement under Subsection (1) by
             189      sending the notification to the email address, mailing address, or telefax number that the person
             190      provides to the designated agent, whether or not the person actually receives the notification.
             191          Section 3. Section 38-1a-306 is amended to read:
             192           38-1a-306. Substantial compliance.
             193          (1) Substantial compliance with the requirements of this chapter is sufficient to claim,
             194      as applicable, a preconstruction lien or a construction lien.
             195          (2) Subsection (1) may not be construed to excuse compliance with or affect the
             196      requirement to file:
             197          (a) a notice of [retention] preconstruction service as provided in Section 38-1a-401 in


             198      order to claim a preconstruction lien; or
             199          (b) a preliminary notice as provided in Section 38-1a-501 in order to claim a
             200      construction lien.
             201          Section 4. Section 38-1a-401 is amended to read:
             202           38-1a-401. Notice of preconstruction service.
             203          (1) (a) A person [who] that desires to claim a preconstruction lien on real property shall
             204      file a notice of [retention] preconstruction service with the registry no later than 20 days after
             205      the person commences providing preconstruction service for the anticipated improvement on
             206      the real property.
             207          (b) A person [who] that fails to file a timely notice of [retention] preconstruction
             208      service as required in this section may not claim a valid preconstruction lien.
             209          (c) A timely filed notice of [retention] preconstruction service is effective as to each
             210      preconstruction service that the person filing the notice provides for the anticipated
             211      improvement under a single original contract, including preconstruction service that the person
             212      provides to more than one supervising subcontractor under that original contract.
             213          (d) A notice of [retention] preconstruction service filed for preconstruction service
             214      provided or to be provided under an original contract for an anticipated improvement on real
             215      property is not valid for preconstruction service provided or to be provided under a separate
             216      original contract for an anticipated improvement on the same real property.
             217          (e) A notice of [retention] preconstruction service that is timely filed with the database
             218      with respect to an anticipated improvement is considered to have been filed at the same time as
             219      the earliest timely filed notice of [retention] preconstruction service for that anticipated
             220      improvement.
             221          (f) A notice of [retention] preconstruction service shall include:
             222          (i) the name, address, telephone number, and email address of the person providing the
             223      preconstruction service;
             224          (ii) the name, address, telephone number, and email address of the person [who] that
             225      employed the person providing the preconstruction service;


             226          (iii) a general description of the preconstruction service the person provided or will
             227      provide;
             228          (iv) the name of the record or reputed owner;
             229          (v) the name of the county in which the property on which the anticipated improvement
             230      will occur is located;
             231          (vi) (A) the tax parcel identification number of each parcel included in that property; or
             232          (B) the entry number of a previously filed notice of [retention] preconstruction service
             233      that includes the tax parcel identification number of each parcel included in that property; and
             234          (vii) a statement that the person filing the notice intends to claim a preconstruction lien
             235      if the person is not paid for the preconstruction service the person provides.
             236          (g) (i) A claimant who is an original contractor or a supervisory subcontractor may
             237      include in a notice of [retention] preconstruction service the name, address, and telephone
             238      number of each subcontractor who is under contract with the claimant to provide
             239      preconstruction service that the claimant is under contract to provide.
             240          (ii) The inclusion of a subcontractor in a notice of [retention] preconstruction service
             241      filed by another claimant is not a substitute for the subcontractor's own submission of a notice
             242      of [retention] preconstruction service.
             243          (2) The burden is on the person filing the notice of [retention] preconstruction service
             244      to prove that the person has substantially complied with the requirements of this section.
             245          (3) (a) Subject to Subsection (3)(b), a person required by this section to file a notice of
             246      [retention] preconstruction service is required to give only one notice for each anticipated
             247      improvement.
             248          (b) A person [who] that provides preconstruction service under more than one original
             249      contract for the same anticipated improvement and desires to claim a preconstruction lien for
             250      preconstruction service provided under each original contract shall file a separate notice of
             251      [retention] preconstruction service for preconstruction service provided under each original
             252      contract.
             253          (4) A person filing a notice of [retention] preconstruction service by alternate means is


             254      responsible for verifying and changing any incorrect information in the notice of [retention]
             255      preconstruction service before the expiration of the period during which the notice is required
             256      to be filed.
             257          Section 5. Section 38-1a-402 is amended to read:
             258           38-1a-402. Notice of preconstruction lien -- Requirements.
             259          (1) Within 90 days after completing a preconstruction service for which a claimant is
             260      not paid in full, a claimant who desires to claim a preconstruction lien shall submit for
             261      recording with each applicable county recorder a notice of preconstruction lien.
             262          (2) A claimant who fails to submit a notice of preconstruction lien as provided in
             263      Subsection (1) may not claim a preconstruction lien.
             264          (3) (a) A notice of preconstruction service lien shall include:
             265          (i) the claimant's name, mailing address, and telephone number;
             266          (ii) a statement that the claimant claims a preconstruction lien;
             267          (iii) the date the claimant's notice of [retention] preconstruction service was filed;
             268          (iv) the name of the person [who] that employed the claimant;
             269          (v) a general description of the preconstruction service provided by the claimant;
             270          (vi) the date that the claimant last provided preconstruction service;
             271          (vii) the name, if known, of the reputed owner or, if not known, the name of the record
             272      owner;
             273          (viii) a description of the project property sufficient for identification;
             274          (ix) the principal amount, excluding interest, costs, and attorney fees, claimed by the
             275      claimant;
             276          (x) the claimant's signature or the signature of the claimant's authorized agent;
             277          (xi) an acknowledgment or certificate as required under Title 57, Chapter 3, Recording
             278      of Documents; and
             279          (xii) if the lien is against an owner-occupied residence, as defined in Section
             280      38-11-102 , a statement meeting the requirements that the division has established by rule,
             281      describing the steps the owner of the owner-occupied residence may take to require a claimant


             282      to remove the lien as provided in Section 38-11-107 .
             283          (b) (i) A claimant who is an original contractor or a supervising subcontractor may
             284      include in a notice of preconstruction lien the name, address, and telephone number of each
             285      subcontractor who is under contract with the claimant to provide preconstruction service that
             286      the claimant is under contract to provide.
             287          (ii) The inclusion of a subcontractor in a notice of preconstruction lien filed by another
             288      claimant is not a substitute for the subcontractor's own submission of a notice of
             289      preconstruction lien.
             290          (4) (a) A county recorder:
             291          (i) shall record each notice of preconstruction lien in an index maintained for that
             292      purpose; and
             293          (ii) need not verify that a valid notice of [retention] preconstruction service is filed
             294      with respect to the claimed preconstruction lien.
             295          (b) All persons are considered to have notice of a notice of preconstruction lien from
             296      the time it is recorded.
             297          (5) (a) Within 30 days after a claimant's notice of preconstruction lien is recorded, the
             298      claimant shall send by certified mail a copy of the notice to the reputed or record owner.
             299          (b) If the record owner's address is not readily available to the claimant, the claimant
             300      may mail a copy of the notice to the owner's last-known address as it appears on the last
             301      completed assessment roll of the county in which the property is located.
             302          (c) A claimant's failure to mail a copy of the notice as required in this Subsection (5)
             303      precludes the claimant from being awarded costs and attorney fees against the reputed or record
             304      owner in an action to enforce the lien.
             305          (6) Nothing in this section may be construed to prohibit a claimant from recording a
             306      notice of preconstruction lien before completing the preconstruction service the claimant
             307      contracted to provide.
             308          Section 6. Section 38-1a-403 is amended to read:
             309           38-1a-403. Effective time and priority of preconstruction lien -- Subordination to


             310      bona fide loan.
             311          (1) Except as otherwise provided in this chapter, a preconstruction lien:
             312          (a) relates back to and takes effect as of the time of filing of the earliest timely filed
             313      notice of [retention] preconstruction service under Section 38-1a-401 for the anticipated
             314      improvement for which the preconstruction lien is claimed; and
             315          (b) has priority over:
             316          (i) any lien, mortgage, or other encumbrance that attaches after the earliest timely filed
             317      notice of [retention] preconstruction service is filed; and
             318          (ii) any lien, mortgage, or other encumbrance of which the claimant had no notice and
             319      that was unrecorded at the time the earliest timely filed notice of [retention] preconstruction
             320      service is filed.
             321          (2) A preconstruction lien is subordinate to an interest securing a bona fide loan if and
             322      to the extent that the lien covers preconstruction service provided after the interest securing a
             323      bona fide loan is recorded.
             324          Section 7. Section 38-1a-405 is enacted to read:
             325          38-1a-405. Preconstruction liens on equal footing.
             326          (1) Each preconstruction lien on a project property is on equal footing with every other
             327      preconstruction lien on the project property, regardless of:
             328          (a) when the claimant submitted the claimant's notice of preconstruction service for
             329      recording;
             330          (b) when the claimant submitted the claimant's notice of preconstruction lien for
             331      recording; or
             332          (c) when the preconstruction service related to the lien occurs.
             333          (2) Subsection (1) does not affect the priority of a construction lender's mortgage or
             334      trust deed, as established under this chapter.


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