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Second Substitute H.B. 56

This document includes House Floor Amendments incorporated into the bill on Tue, Feb 25, 2014 at 3:47 PM by jeyring. -->

Representative Mike K. McKell proposes the following substitute bill:


             1     
MECHANICS LIEN REVISIONS

             2     
2014 GENERAL SESSION

             3     
STATE OF UTAH

             4     
Chief Sponsor: Mike K. McKell

             5     
Senate Sponsor: Stephen H. Urquhart

             6     
             7      LONG TITLE
             8      General Description:
             9          This bill amends provisions relating to unauthorized and excessive claims of
             10      preconstruction and construction liens.
             11      Highlighted Provisions:
             12          This bill:
             13          .    provides that a party to a claim for an excessive notice of preconstruction lien or an
             14      excessive notice of construction lien may submit that claim to binding arbitration;
             15          .    creates procedures to initiate, conduct, and appeal an arbitration proceeding to
             16      resolve a claim for an excessive notice of preconstruction lien or an excessive notice
             17      of construction lien;
             18          .    establishes an expedited procedure to nullify a preconstruction lien or a construction
             19      lien that is invalid because the lien claimant did not file a notice of preconstruction
             20      service or a preliminary service; and
             21          .    makes technical and conforming changes.
             22      Money Appropriated in this Bill:
             23          None
             24      Other Special Clauses:
             25          None


             26      Utah Code Sections Affected:
             27      AMENDS:
             28           38-1a-308 , as renumbered and amended by Laws of Utah 2012, Chapter 278
             29      ENACTS:
             30           38-1a-805 , Utah Code Annotated 1953
             31     
             32      Be it enacted by the Legislature of the state of Utah:
             33          Section 1. Section 38-1a-308 is amended to read:
             34           38-1a-308. Intentional submission of excessive lien notice -- Criminal and civil
             35      liability.
             36          (1) As used in this section, "residential project" means a project on real property:
             37          (a) for which preconstruction service or construction work is provided; and
             38          (b) that consists of:
             39          (i) one single-family residence; or
             40          (ii) one multi-family residence that contains no more than four units.
             41          [(1)] (2) A person is guilty of a class B misdemeanor if:
             42          (a) the person intentionally submits for recording a notice of preconstruction lien or
             43      notice of construction lien against any property containing a greater demand than the sum due;
             44      and
             45          (b) by submitting the notice, the person intends:
             46          (i) to cloud the title;
             47          (ii) to exact from the owner or person liable by means of the excessive notice of
             48      preconstruction or construction lien more than is due; or
             49          (iii) to procure any unjustified advantage or benefit.
             50          [(2)] (3) (a) As used in this Subsection [(2)] (3), "third party" means an owner, original
             51      contractor, or subcontractor.
             52          (b) In addition to any criminal penalty under Subsection [(1)] (2), a person who
             53      submits a notice of preconstruction lien or notice of construction lien as described in
             54      Subsection [(1)] (2) is liable to a third party who is affected by the [lien] notice of
             55      preconstruction lien or the notice of construction lien for twice the amount by which the
             56      [excessive] lien notice exceeds the amount actually due or the actual damages incurred by the


             57      owner, original contractor, or subcontractor, whichever is greater.
             58          (4) A party to a claim described in Subsection (3)(b) may elect to submit the claim to
             59      arbitration by filing a notice to submit the claim to binding arbitration in the district court in
             60      which the claim was filed if:
             61          (a) the notice of preconstruction lien, or the notice of construction lien, that is the
             62      subject of the claim is:
             63          (i) for a residential project; and
             64          (ii) for $50,000 or less;
             65          (b) the claimant has previously and timely filed a complaint in a district court that
             66      includes a claim described in Subsection (3)(b);
             67          (c) the party files the notice to submit the claim to arbitration no more than 14 days
             68      after the day on which an answer to the complaint is filed; and
             69          (d) the notice to submit the claim to arbitration is filed while the claim is still pending.
             70          (5) (a) A party who elects arbitration under this section may rescind the election in
             71      accordance with Subsection (5)(b) if the rescission is made:
             72          (i) within 90 days after the day on which the party files the notice to submit the claim
             73      to arbitration; and
             74          (ii) no less than 30 days before any scheduled arbitration hearing.
             75          (b) To rescind an election to arbitrate under this Subsection (5), a party shall file a
             76      notice of the rescission of the election to arbitrate with the district court in which the claim was
             77      filed.
             78          (c) All discovery completed in anticipation of the arbitration hearing shall be available
             79      for use by the parties as allowed by the Utah Rules of Civil Procedure and the Utah Rules of
             80      Evidence.
             81          (d) A party who elects to arbitrate under this section and then rescinds the election to
             82      arbitrate under this Subsection (5) may not elect to arbitrate the claim under this section again.
             83          (6) If a party rescinds an election to arbitrate in accordance with Subsection (5),
             84      another party to the claim may elect to submit the claim to arbitration by filing a notice to
             85      submit the claim to binding arbitration with the district court in which the claim was filed if:
             86          (a) the party did not previously submit and rescind an election to arbitrate under this
             87      section;


             88          (b) the notice to submit the claim to arbitration is filed no more than 14 days after the
             89      day on which the notice of rescission of the election to arbitrate is filed by another party; and
             90          (c) the notice to submit the claim to arbitration is filed while the claim is still pending.
             91          (7) (a) Unless otherwise agreed to by the parties, a claim that is submitted to arbitration
             92      under this section shall be resolved by a single arbitrator.
             93          (b) All parties shall agree on the single arbitrator described in Subsection (7)(a) within
             94      60 days after the day on which an answer is filed.
             95          (c) If the parties are unable to agree on a single arbitrator as required under Subsection
             96      (7)(b), the parties shall select a panel of three arbitrators.
             97          (d) If the parties select a panel of three arbitrators under Subsection (7)(c):
             98          (i) each side shall select one arbitrator; and
             99          (ii) the arbitrators selected under Subsection (7)(d)(i) shall select one additional
             100      arbitrator to be included in the panel.
             101          (8) Unless otherwise agreed to in writing:
             102          (a) each party shall pay an equal share of the fees and costs of the arbitrator selected
             103      under Subsection (7)(b); or
             104          (b) if an arbitration panel is selected under Subsection (7)(d):
             105          (i) each party shall pay the fees and costs of that party's selected arbitrator; and
             106          (ii) each party shall pay an equal share of the fees and costs of the arbitrator selected
             107      under Subsection (7)(d)(ii).
             108          (9) Except as otherwise provided in this section or otherwise agreed to by the parties,
             109      an arbitration proceeding conducted under this section shall be governed by Title 78B, Chapter
             110      11, Utah Uniform Arbitration Act.
             111          (10) (a) Subject to the provisions of this section, the Utah Rules of Civil Procedure and
             112      the Utah Rules of Evidence shall apply to an arbitration proceeding under this section.
             113          (b) The Utah Rules of Civil Procedure and the Utah Rules of Evidence shall be applied
             114      liberally with the intent of resolving the claim in a timely and cost-efficient manner.
             115          (c) Subject to the provisions of this section, discovery shall be conducted in accordance
             116      with Rules 26 through 37 of the Utah Rules of Civil Procedure and shall be subject to the
             117      jurisdiction of the district court in which the claim is filed.
             118          (d) Unless otherwise agreed to by the parties or ordered by the court, discovery in an


             119      arbitration proceeding under this section shall be limited to the discovery available in a tier 1
             120      case under Rule 26, of the Utah Rules of Civil Procedure.
             121          (11) A written decision by a single arbitrator or by a majority of the arbitration panel
             122      shall constitute a final decision.
             123          (12) An arbitration award issued under this section shall be the final resolution of all
             124      excessive notice claims described in Subsection (2) between the parties and may be reduced to
             125      judgment by the court upon motion and notice unless:
             126          (a) either party, within 20 days after the day on which the arbitration award is served,
             127      files a notice requesting a trial de novo in the district court in which the claim was filed; or
             128          (b) the arbitration award has been satisfied.
             129          (13) Upon filing a notice requesting a trial de novo under Subsection (12):
             130          (a) unless otherwise stipulated to by the parties or ordered by the court, the parties are
             131      allowed an additional 60 days for discovery;
             132          (b) the additional discovery time described in Subsection (13)(a)(i) shall run from the
             133      day on which the notice requesting a trial de novo is filed; and
             134          (c) the claim shall proceed through litigation pursuant to the Utah Rules of Civil
             135      Procedure and the Utah Rules of Evidence in the district court.
             136          (14) If the plaintiff, as the moving party in a trial de novo requested under Subsection
             137      (11), does not obtain a verdict that is at least 10% greater than the arbitration award, the
             138      plaintiff is responsible for all of the nonmoving party's costs, including expert witness fees.
             139          (15) If a defendant, as the moving party in a trial de novo requested under Subsection
             140      (11), does not obtain a verdict that is at least 10% less than the arbitration award, the defendant
             141      is responsible for all of the nonmoving party's costs, including expert witness fees.
             142          (16) If a district court determines, upon a motion of the nonmoving party, that the
             143      moving party's use of the trial de novo process was filed in bad faith, as defined in Section
             144      78B-5-825 , the district court may award reasonable attorney fees to the nonmoving party.
             145          (17) All arbitration awards issued under this section shall bear postjudgment interest
             146      pursuant to Section 15-1-4 .
             147          Section 2. Section 38-1a-805 is enacted to read:
             148          38-1a-805. Failure to file notice -- Petition to nullify preconstruction or
             149      construction lien -- Expedited proceeding.


             150          (1) An owner of an interest in a project property that is subject to a recorded
             151      preconstruction lien or a recorded construction lien H. that is not cancelled or withdrawn .H
             151a      may petition the district court in the county
             152      in which the project property is located for summary relief to nullify the preconstruction lien or
             153      the construction lien if the owner claims that the preconstruction lien or the construction lien is
             154      invalid because:
             155          (a) the lien claimant did not timely file a notice of preconstruction service under
             156      Section 38-1a-401 ; or
             157          (b) the lien claimant did not timely file a preliminary notice under Section 38-1a-501 .
             158          (2) A petition under Subsection (1) shall:
             159          (a) state with specificity the claim that the lien claimant's preconstruction lien or the
             160      lien claimant's construction lien is invalid because the lien claimant did not file a notice of
             161      preconstruction service or a preliminary notice, as applicable;
             162          (b) be supported by a sworn affidavit of the petitioner; and
             163          (c) be served on the lien claimant, in accordance with the Rules of Civil Procedure,
             164      within three business days after the day on which the petitioner files the petition in the district
             165      court.
             166          (3) (a) If the court finds that a petition does not meet the requirements described in
             167      Subsection (2), the court may dismiss the petition without a hearing.
             168          (b) If the court finds that a petition meets the requirements described in Subsection (2),
             169      the court shall schedule an expedited hearing to determine whether the preconstruction lien or
             170      the construction lien is invalid because the lien claimant failed to file a notice of
             171      preconstruction service or a preliminary notice, as applicable.
             172          (4) (a) If the court grants a hearing, within three business days after the day on which
             173      the court schedules the hearing H. and at least seven business days before the day on which the
             173a      hearing is scheduled .H , the petitioner shall serve on the lien claimant, in accordance
             174      with the Rules of Civil Procedure, a copy of the petition, notice of the hearing, and a copy of
             175      the court's order granting the expedited hearing.
             176          (b) The lien claimant may attend the hearing and contest the petition.
             177          (5) An expedited proceeding under this section may only determine:
             178          (a) whether the lien claimant filed a notice of preconstruction service or a preliminary
             179      notice; and
             180          (b) if the lien claimant failed to file a notice of preconstruction service or a preliminary


             181      notice, whether the lien claimant's preconstruction lien or construction lien is valid.
             182          (6) (a) If, following a hearing, the court determines that the preconstruction lien or the
             183      construction lien is invalid, the court shall issue an order that:
             184          (i) contains a legal description of the property;
             185          (ii) declares the preconstruction lien or the construction lien void ab initio;
             186          (iii) releases the property from the lien; and
             187          (iv) awards costs and reasonable attorney fees to the petitioner.
             188          (b) The petitioner may submit a copy of an order issued under Subsection (6)(a) to the
             189      county recorder for recording.
             190          (7) (a) If, following a hearing, the court determines that the preconstruction lien or the
             191      construction lien is valid, the court shall H. :
             191a          (i) .H dismiss the petition H. ; .H and H. [ may ]
             191b          (ii) .H award costs and
             192      reasonable attorney fees to the lien claimant.
             193          (b) The dismissal order shall contain a legal description of the property.
             194          (c) The lien claimant may submit a copy of the dismissal order to the county recorder
             195      for recording.
             196          (8) If a petition under this section contains a claim for damages, the proceedings related
             197      to the claim for damages may not be expedited under this section.


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