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Olsen Skoubye & Nielson, LLC
999 Murray Holladay Road, Suite 200
Salt Lake City, Utah 84117
(801) 365-1030 (phone)
(801) 365-1031 (Fax)
info@osnlaw.com
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Construction Lien FAQ
Q. What can I do if I did work on a project but did not receive payment?
A. If you have provided labor, materials or other services to a property, you are likely entitled to a lien against the property to which you provided labor, material or other services. The Utah mechanic’s lien statute provides that contractors, subcontractors and all other persons performing any services or furnishing or renting any materials or equipment used in the construction, alteration, or improvement of any building or structure or improvement, are entitled to have a lien upon the property to which they rendered service, performed labor, or furnished materials or equipment.
Q. What steps do I have to take to preserve my lien rights when I start work on a construction project?
A. Unless you have a contract with the owner of the project, the sure way to preserve your lien rights on every project is to file a Preliminary Notice on the State Construction Registry (“SCR”). A Preliminary Notice has to be filed within the later of 20 days of your first work on the project, or 20 days after the filing of a Notice of Commencement for the Project. A preliminary notice can be filed for a small fee - $1.00 if you file online or $6.00 if you file using the offline method. You can file online by going to http://scr.utah.gov, creating an account and attaching a preliminary notice to the Notice of Commencement related to your job. If you are unable to use the online option, you may also print downloadable Preliminary Notice forms at http://scr.utah.gov/forms/Preliminary%20Notice.pdf and mail or fax the Preliminary Notice to the State Construction Registry.
Q. What is a Notice of Commencement and how does it affect my lien rights?
A. A Notice of Commencement is posted on the SCR and gives notice to all interested parties that work on a project has commenced. Additionally, a valid Notice of Commencement triggers a requirement that all subcontractors or suppliers working on the project must file a Preliminary Notice in order to preserve their lien rights. Currently, municipalities are the entity required to provide the information about the project to the SCR, but owners or original contractors may also file a Notice of Commencement. On permitted projects, a valid Notice of Commencement has to be filed by a municipality within 15 days after that municipality issues the building permit. If it appears the municipality is not going to meet the 15-day deadline, the original contractor or owner may filed the Notice of Commencement themselves. On non-permitted and exempted projects, a Notice of Commencement must be filed by an original contractor or owner-builder within 15 days after commencement of physical construction work at the project site. If a Notice of Commencement is not timely filed, subcontractors and suppliers are not required to file a Preliminary Notice in order to preserve their lien rights.
Q. What happens if I provided labor or material to a project but didn’t file a Preliminary Notice?
A. In cases where a valid Notice of Commencement for a project has been filed with the SCR, the failure to file a Preliminary Notice means you have not preserved your lien rights and may not be able to record a lien against the property. However, an experienced construction attorney will be able to evaluate your lien claim and may be able to challenge the validity of the Notice of Commencement, thus preserving your lien rights. In addition, even if your lien rights are lost, you can still pursue contract and common law remedies against the non-paying party and may be entitled to relief from the Utah Lien Recovery Fund. If you failed to file a Preliminary Notice on a project, it is important that you talk with an experienced construction attorney as soon as possible in order to understand your legal options.
Q. Does my lien have priority over other liens, trust deeds or encumbrances?
A. In Utah, every mechanic’s lien on a project relates back to, and takes effect as of, the date of first substantial work on the project site. First substantial work has been interpreted by the courts to mean “visible signs of construction to inform prospective lenders who inspect the premises that liens have attached.” First substantial work may include excavation for the footings and foundation or the stockpiling of construction materials on the project site. A mechanic’s lien has priority over any lien, mortgage or other encumbrance that attaches after the date of first substantial work. This means that if the excavator commenced first substantial work prior to the date the lender records its Trust Deed, every mechanic’s lien, whether recorded by the excavator, drywaller, electrician or painter, relates back to the date of first substantial work and enjoys priority over the lender’s Trust Deed. As to mechanic’s liens, all are on equal footing, regardless of the time of filing.
Q. What is a Notice of Completion?
A. A Notice of Completion is a statutorily required notice posted on the SCR that states all work under the original contract has been completed. The Notice of Completion must include the information specified by the mechanic’s lien statute and unless otherwise requested, is emailed to every person that filed a Notice of Commencement or Preliminary Notice or any other person that requested notices concerning the project.
Q. How do I record a timely and proper lien?
A. If you provided work to a project and have not been paid, you have the right to lien that property and need to record a Notice of Lien as quickly as possible. Liens have strict timing requirements that have to be met in order to preserve the lien. Under the Utah mechanic’s lien statute, a person entitled to a lien has 90 day after the day on which a notice of completion is filed or 180 days after the day on which occurs final completion of the original contract if no notice of completion is filed. The 90 day deadline is straightforward - if a Notice of Completion is filed, you have 90 days to record a Notice of Lien. The 180 day deadline is a bit more confusing. If no Notice of Completion is filed, a lien claimant has 180 days from the date of “final completion of the original contract” to record its Notice of Lien. Final completion of the original contract is the date on which the Certificate of Occupancy is issued by the municipality, if a Certificate of Occupancy is required in that jurisdiction; if no Certificate of Occupancy is required, then 180 days from the date of the final inspection; or if there is no final inspection, then 180 days from the date of last substantial work on the project. The 90 and 180 day lien cut-off dates are strictly enforced. If you file a Notice of Lien after the time required, you will not be able to be enforce the lien.
Q. How do I enforce my lien?
A. A lien is enforced by filing a lien foreclosure action against the property on which you filed the lien. There are strict timing requirements that you must follow in order to enforce your lien. Once you have filed a timely Notice of Lien, you must file an action to enforce the lien within 180 days from the day on which you recorded your Notice of Lien. If you fail to enforce your lien within 180 days from the day on which you recorded your Notice of Lien, your lien is automatically and immediately void. Once you have recorded a Notice of Lien, you need to consult an experienced construction attorney to help your enforce your lien within the 180 day time period.
Q. How much does it cost to enforce a lien?
A. The Utah mechanic’s lien statute provides that in any action brought to enforce a mechanic’s lien, the successful party is entitled to recover a reasonable attorneys’ fee from the other party. The cost of enforcing a lien can depend on the priority of the lien, the status of your supporting documentation for the lien and the actions taken by the owner whose property you are seeking to foreclose to enforce your lien. This is a positive because it allows a valid lien holder to be reimbursed by the other party for the costs incurred in enforcing the valid lien. However, before you decide to enforce your lien, you need to consult with an experienced construction attorney to ensure that your lien meets all of the timing requirements of the mechanic’s lien statute and you have all of the proper documentation to support your lien. Doing so will ensure that your lien is valid and enforceable. Remember that if you attempt to enforce an invalid lien, you may be required to reimburse the property owner’s attorneys fees and costs incurred defending against your lien.