Liens - Unraveling the Confusing Process to Getting Paid!
THE FOLLOWING IS A DETAILED SUMMARY OF STEPS, TIMELINES, AND OPTIONS FOR PROTECTING THE RIGHTS OF A CONTRACTOR FOR THE WORK THAT THEY HAVE DONE (FOCUSED ON UTAH LAWS). THESE LAWS VARY FROM STATE TO STATE AND CAN CHANGE OFTEN, SO MAKE SURE TO HAVE A CONSULT WITH OUR TEAM TO SEE IF ANY OF THESE LAWS HAVE CHANGED SINCE THIS ARTICLE WAS POSTED. Also, for some simplicity, we are going to ignore the process that could be different when contractors are working on government or public projects. This is only going to discuss the process for private projects, whether residential or commercial.
Before jumping straight into a step-by-step detailed overview, I simply want to state that these rules change a lot, and sometimes even year-to-year. If you ever have questions and want to make sure that you are getting paid 100% for the work you do and the materials you provide, please reach out anytime. That said, let’s get into the nitty gritty details of preliens, liens, and their enforcement.
1. Who May Have A Lien?
Licensed contractors, licensed subcontractors, and all persons performing any labor or services or furnishing any material or equipment (including rental equipment) to the project. NOTE THAT THROUGHOUT THESE LAWS, THE TERM “CONSTRUCTION WORK” IS USED TO INCLUDE THE FURNISHING OF LABOR, SERVICES, MATERIALS OR EQUIPMENT. Providers of preconstruction services such as planning, designing, surveying, etc., that take place prior to the commencement of construction, also have lien rights. A claimant may have both a preconstruction lien and a separate construction lien on the same property. It also includes those supplying equipment to a subcontractor. Suppliers to suppliers have lien rights as long as their materials can be traced to the project, and they comply with all notice requirements. Employee benefit funds have standing to bring a lien claim; ERISA does not preempt the lien law. Those who provide clean-up work alone, such as after flooding, do not have lien rights. NOTE that an owner-builder can be considered an original contractor, but a contract between an owner-builder and another is not considered an original contract. [38-1a-102, 38-1a-301, 58-55-604; Trench Shoring Servs., Inc. v. Saratoga Springs Dev., LLC, 57 P.3d 241, UT App 300 (2002); Forsberg v. Bovis Lend Lease, Inc., 184 P.3d 610 (Utah App.,2008); All Clean, Inc. v. Timberline Properties, 264 P.3d 244, (Utah App., 2011)] NOTE that against an owner-occupied residence, only those contracting directly with the property owner may file a lien directly against the real property. All other claims will be against the “Residential Lien Recovery Fund.” Note that a subcontractor is not allowed to file a lien where the total amount of the original contract is under $5,000. [38-1a-701; 38-11-107]
CLAIM AGAINST CONTRACTOR’S PAYMENT BOND:
Everyone who furnishes labor, services, equipment, or material to the project. Employee benefit funds have standing to bring a bond claim; ERISA does not preempt the bond law. [14-2-1; Forsberg v. Bovis Lend Lease, Inc., 184 P.3d 610 (Utah App.,2008)]
RETENTION PROCEEDS:
Note that where retention is withheld from a claimant by the party with whom the claimant contracts, and is not timely released, a claimant may bring an action to recover it. [13-8-5]
2. What Is The Lien Against?
NONRESIDENTIAL: The land where the building is situated and such land as may be necessary for convenient use of the building. [38-1a-302]
RESIDENTIAL: Where the owner of a residential project is an owner-occupant, enters into a written contract with an appropriately-licensed contractor, obtains all required building permits, and makes payment in full to the contractor, the owner need not require a bond from the original contractor, and all of the subs and suppliers’ claims will be against the “residence lien recovery fund”, rather than against the property, the homeowner or the payment bond. Claimants contracting directly with the owner, however, may file a lien against the property. [38-11-107, 38-11-204]
NOTE that where the owner, contractor or subcontractor affected by a lien substitutes, within 90 days after the first summons is served in the foreclosure action, an alternate security, in the form of a surety bond or cash deposit, the claimant must proceed against the alternate security rather than the real property. Note also that the contractor’s payment bond discussed below is NOT the same as alternate security. [38-1a-804]
CONTRACTOR’S PAYMENT BOND:
This is to be in the amount of the original contract. [14-2-1] NOTE that if the owner fails to obtain a payment bond when required to do so, the owner will be held liable for labor and materials supplied to the project, up to the amount of the commercial contract. [14-2-2; Schor, §45.02[D][3][a]]
RETENTION PROCEEDS:
The claim is against the retention withheld from the claimant by the party with whom the claimant contracts. [13-8-5] (NOTE, however, that a preliminary notice for a claim for preconstruction services is called a notice of preconstruction service. [38-1a-401])
3. Who Must Give The Preliminary Notice?
PRECONSTRUCTION LIEN (Notice):
All providers of preconstruction services. For providers of preconstruction services, a preliminary notice is called a notice of preconstruction services. The notice is valid for all preconstruction services provided under the same original contract. If the claimant provides preconstruction services under a different original contract on the project, the claimant needs to file a separate notice. All timely filed notices of preconstruction service are deemed to be filed at the same time as the earliest timely filed preliminary notice for that project. [38-1a-401]
CONSTRUCTION LIEN:
All subcontractors and suppliers on all projects must file a preliminary notice, except for people who are solely providing labor for wages. There is no longer any Notice of Commencement requirement. [38-1a-501]
-NOTE that if claimant is supplying labor, materials, etc. under more than one original contract, claimant must give separate notice covering labor, materials, etc. supplied under each original contract. [38-1a-501]
CLAIM AGAINST CONTRACTOR’S PAYMENT BOND:
Everyone except claimants contracting directly with the owner or owner-builder, and an individual performing labor for wages. Temporary labor service companies and organizations, professional employer companies and organizations, and any other entity that provides labor must all give a preliminary notice. [14-2-5]
CLAIM AGAINST RETENTION PROCEEDS:
No requirement of preliminary notice.
4. To Whom Is The Preliminary Notice Given?
To the designated agent of the construction notice registry. [See SCR.utah.gov or ConstructionRegistry.utah.gov] Once the registry has received the preliminary notice, the designated agent will send notice of all other filings for a project to whoever files a Notice of Commencement (on a bond claim), a preliminary notice, or a Notice of Completion, unless the person requests not to receive notice of the filings, or does not provide the designated agent with adequate contact information. The agent will also send notice to any interested person who requests notice of filings. This information is available online and with hard copies. People interested in a specific construction project may obtain information via email, fax, post, etc.
NOTE ALSO that if an owner, contractor, subcontractor or other interested person believes a preliminary notice has been filed erroneously, they can request that the claimant provide evidence establishing the validity of the preliminary notice and the claimant must provide the evidence within 10 days after the request, or else the claimant must cancel the notice from the registry. [38-1a-201, 38-1a-401, 14-2-5; 38-1a-307]
RESIDENTIAL PROJECTS:
The notice must be included in all contracts between the original contractor and the owner. [38-11-108]
CLAIM AGAINST RETENTION PROCEEDS:
No requirement of preliminary notice.
5. When Must Preliminary Notice Be Given?
Preconstruction services: Filed no later than 20 days after the day the person commences providing preconstruction services for the anticipated improvement. NOTE that where an interested person requests evidence establishing the validity of the notice of preconstruction service, the claimant must provide proof establishing the validity within 10 days after the request. If the proof is not timely provided, the claimant must immediately cancel the notice from the registry. Any incorrect information in the notice must be corrected before the time for filing the notice expires. (NOTE ALSO that preconstruction notices are not granted the effective-five-days-after-filing option if they’re filed late. If a notice of preconstruction services is filed late, it’s invalid.) [38-1a-401; Schor at §45.03[A][1]]
All other claimants:
Filed no later than 20 days after the claimant first provides labor, services, materials or equipment. IF, HOWEVER, a Notice of Completion has been filed, then the preliminary notice must be filed no later than ten days after that Notice of Completion has been filed (even if that is less than 20 days after claimant first provides labor, services, etc.). In either case, the preliminary notice is effective as to everything supplied by the claimant, even if to more than one contractor or subcontractor. If the notice is given later, it becomes effective FIVE DAYS AFTER IT IS FILED. Thus if it is given more than 20 days after claimant’s first labor or delivery, the claimant has no right to claim a lien for anything furnished before OR FOUR DAYS AFTER the notice is given, though the claimant does retain the right to pursue its customer for ALL items furnished and unpaid, both before and after the preliminary notice is given. If the claimant is supplying labor, materials, etc. under more than one original contract, the notice requirements must be met as to each original contract. NOTE that timely filed preliminary notices relate back to the date of the first filed preliminary notice. (The first filed preliminary notice is the earliest preliminary notice filed, that is not cancelled, and that is filed on a project that is not completed at the time of filing.) NOTE that preliminary notices may not be given more than ten days after the Notice of Completion has been filed. NOTE ALSO that the preliminary notice must be filed before the notice of lien may be filed. [38-1a-501; 38-1a-102]
RESIDENTIAL PROJECTS:
The notice must be included in all contracts between the original contractor and the owner. [38-11-108]
CLAIM AGAINST RETENTION PROCEEDS:
No requirement of preliminary notice.
6. Contents of Preliminary Notice.
Go to SCR.utah.gov or ConstructionRegistry.utah.gov to complete form online.
PRECONSTRUCTION SERVICES:
– The name, address, telephone number, and email address of the person providing the preconstruction service;
– The name, address, telephone number, and email address of the person who employed the person providing the preconstruction service;
– A general description of the preconstruction service the person provided or will provide;
-The name of the record or reputed owner;
-The name of the county in which the property on which the anticipated improvement will occur is located;
-Either (a) the tax parcel identification number of each parcel included in that property; or (b) the number of the building permit or the entry number of a previously filed notice of preconstruction service that includes the tax parcel identification number of each parcel included in that property; and
-A statement that the person filing the notice intends to claim a preconstruction lien if the person is not paid for the preconstruction service the person provides.
-NOTE THAT a claimant who is an original contractor or a supervisory subcontractor may include in a notice of preconstruction service the name, address, and telephone number of each subcontractor who is under contract with the claimant to provide preconstruction service that the claimant is under contract to provide. BUT, the inclusion of a subcontractor in a notice of preconstruction service filed by another claimant is not a substitute for the subcontractor’s own submission of a notice of preconstruction service. [38-1a-401]
RESIDENTIAL PROJECTS:
The notice must be included in all contracts between the original contractor and the owner. [38-11-108]
ALL OTHER CLAIMS:
-Name, address, telephone number and email address of the claimant;
-Name and address of the person who contracted with the claimant for the furnishing of the labor, materials, services or equipment;
-Name of the record owner or reputed owner;
-Name of the original contractor under which the claimant is providing or will provide construction work;
-The address of the project property or a description of the location of the project.
-The name of the county in which the property is located;
-The tax parcel identification number of each parcel included in the project property, or the entry number of either (a) a previously filed notice of construction loan on the same project, (b) a previously filed preliminary notice on the project that includes the tax parcel ID number of each parcel included in the project property, or (c) the building permit issued for the project.
-The claimant will be best protected (having substantially complied with the statutory requirements) if the preliminary notice links, within the registry, to a preliminary notice filed by an original contractor for the same project, using the entry number assigned to the original contractor’s preliminary notice.
–The preliminary notice MAY also include: The subdivision, development or other project name, and the lot or parcel number of each lot or parcel included in the project property.
NOTE: If the claimant wishes to receive notification of other notices filed, the claimant must provide the registry with the claimant’s email address. [38-1a-501]
CLAIM AGAINST RETENTION PROCEEDS:
No requirement of preliminary notice.
7. How Must Preliminary Notice Be Given?
Filed electronically. Notices may also be filed by ‘alternate means’, including fax, or US mail. [38-1a-201, 38-1a-401]
RESIDENTIAL PROJECTS:
The notice must be included in all contracts between the original contractor and the owner. [38-11-108]
CLAIM AGAINST RETENTION PROCEEDS:
No requirement of preliminary notice.
8. Who Must Give Interim Notice?
An interim notice is not required.
9. Who Must Give Final Notice?
Every claimant, for both construction liens and preconstruction liens. [ 38-1a-402; 38-1a-502] NOTE that where a preconstruction or construction lien has been paid, if a person interested in the property subject to the lien asks the claimant to record a cancellation of the lien, the claimant must do so or be liable to thee requester in the amount of $100/day after the deadline, or actual damages, whichever is greater. [38-1a-803]
RESIDENTIAL PROJECTS:
The notice must also be included in all lien notices, for both preconstruction and construction liens. [38-1a-502]
PAYMENT BOND:
No specific provision.
BALANCE STATEMENT/AMEND-MENT TO PRELIMINARY NOTICE (also called a “Remaining to Complete”):
Where the claimant provides construction work (i.e., supplies labor, materials or services) to an owner or original contractor who files a notice of intent to obtain final completion, the claimant must file an amendment to his or her previously-filed preliminary notice. [38-1a-506]
CLAIM FOR RETENTION PROCEEDS:
The original contractor or the subcontractor from whom retention has been improperly withheld. [13-8-5]
10. To Whom Is Final Notice Given?
-County recorder for each applicable county
-Owner or reputed owner. [38-1a-402, 38-1a-502]
RESIDENTIAL PROJECTS:
The notice must also be included in all lien notices, for both preconstruction and construction liens. [38-1a-502]
PAYMENT BOND:
No specific provision.
BALANCE STATEMENT/AMEND-MENT TO PRELIMINARY NOTICE (also called a “Remaining to Complete”):
To the state construction registry. The demand for adequate assurance is to be given to the owner, contractor or sub with whom the claimant is in privity of contract, and apparently the claimant must also give copies to the owner and contractor. [38-1a-506]
CLAIM FOR RETENTION PROCEEDS:
The owner withholding the retention. [13-8-5(5)]
11. When Is Final Notice Given?
To county recorder:
PRECONSTRUCTION LIEN: Recorded during or within 90 days after completing preconstruction services for which claimant is not paid in full. NOTE, however, that preconstruction work is considered complete for any project, project phase or bid package as of the date that construction work begins on that project, project phase or bid package. For service upon owner, see below. [38-1a-402; 38-1a-404]
CONSTRUCTION LIEN: If a Notice of Completion is filed, then notice must be recorded no later than 90 days after that filing, but in any event not later than 180 days after the date that final completion of the original contract occurs. If a Notice of Completion is not filed, then claimant’s notice must be recorded no later than 180 days after the date of final completion of the original contract. [38-1a-502]. A recent case has held, however, that a lien notice filed within 90 days after filing of the Notice of Completion, but more than 180 days after final completion of the original contract, is timely. [General Const. & Development, Inc. v. Peterson Plumbing Supply, 248 P.3d 972 (Utah 2011)] [38-1a-502] NOTE, HOWEVER, where claimant timely files its notice, but does not timely foreclose, claimant cannot file another notice for the same work, even if the original contract has not been completed. [Foothill Park, LC v. Judston, Inc., 182 P.3d 924 (Utah App.,2008)]
Note that Final Completion occurs either the date that a permanent certificate of occupancy is issued; the date of final inspection by the governing public agency (if one is required); or, if no certificate of occupancy or final inspection is required, then the date on which there remains no substantial work to be completed. If work remains to be completed, for which the owner is holding payment to ensure that the work is done, then final completion does not occur. If the contract is terminated prior to completion and no certificate of occupancy or final inspection is issued, then completion occurs on the last date on which substantial work was performed under the original contract. Note also that “completion” occurs when the contract has been substantially completed, leaving only minor or trivial work to be accomplished, and the work has been accepted by the owner. [38-1a-102; Ellsworth Paulsen Const. Co. v. 51-SPR, L.L.C., 144 P.3d 261 (Utah 2006), aff’d at 183 P.3d 248 (Utah 2008)] Where the subcontractor performs substantial work after a certificate of occupancy is issued, then the sub’s notice of lien will need to be filed no later than 180 days after completion of that subcontractor’s work. NOTE that where a Notice of Commencement is not timely filed, the deadline and requirement for filing a lien do not apply, however it is always recommended that the lien claim be timely given. [38-1a-502]
To the reputed owner or record owner:
PRECONSTRUCTION LIENS: A copy of the notice is to be sent by certified mail within 30 days after the claimant’s notice of preconstruction lien is recorded. Failure to do so precludes the claimant from recovering attorney’s fees and costs. [38-1a-402]
CONSTRUCTION LIENS: Notice must be ‘delivered or mailed’ within 30 days after filing the notice of preconstruction lien or construction lien, as appropriate. Failure to do so precludes the claimant from recovering attorney’s fees. [38-1a-402, 38-1a-502, 38-10-105]
RESIDENTIAL PROJECTS:
The notice must also be included in all lien notices, for both preconstruction and construction liens. [38-1a-502]
PAYMENT BOND:
No specific provision.
BALANCE STATEMENT/AMEND-MENT TO PRELIMINARY NOTICE (also called a “Remaining to Complete”):
Filed no later than 20 days after the owner or contractor files a notice of intent. [38-1a-506] In addition, within 10 days of filing the Balance Statement, or Amended Preliminary Notice, the claimant may demand a statement of adequate assurance from the owner, contractor or sub with whom the claimant has privity of contract. [38-1a-506]
CLAIM FOR RETENTION PROCEEDS:
No specific date. But the sooner the better as the retention is to be released within the later of 45 days after receiving (a) a billing statement from the original contractor, (b) certificate of occupancy or acceptance; (c) authorization of partial occupancy; or (d) acceptance by the original contractor of final payment. [13-8-5]
12. How Is Final Notice Given?
County recorder: Filed.
Owner or reputed owner:
Notice of Preconstruction Lien: Delivered by certified mail. [38-1a-402]
Notice of Construction Lien: Deliver or mail by certified mail, and if owner’s address is not readily available to the claimant, then the claimant may mail the notice to the owner’s last known address as it appears on the last completed assessment roll of the county in which the property is located. FAILURE TO DO SO PRECLUDES AWARD OF ATTORNEY’S FEES. It appears that mailing is key. [38-1a-502; 38-1a-402]
BALANCE STATEMENT/AMEND-MENT TO PRELIMINARY NOTICE (also called a “Remaining to Complete”): Filed. [38-1a-506] The demand for adequate assurance is to be given to the owner and contractor, and presumably to the subcontractor as well, by (i) hand delivery with a responsible party’s acknowledgment of receipt; (ii) by certified mail with a return receipt; or (iii) in the same manner as a summons and complaint may be served. [38-1a-506]
RESIDENTIAL PROJECTS:
The notice must also be included in all lien notices, for both preconstruction and construction liens. [38-1a-502]
CLAIM FOR RETENTION PROCEEDS:
No specific provision. [13-8-5]
13. Contents of Final Notice
Preconstruction Lien:
-The claimant’s name, mailing address, and telephone number;
-A statement that the claimant claims a preconstruction lien;
-The date the claimant’s notice of preconstruction service was filed;
-The name of the person who employed the claimant;
-A general description of the preconstruction service provided by the claimant;
-The date that the claimant last provided preconstruction service;
-The name, if known, of the reputed owner or, if not known, the name of the record owner of the property;
-A description of the project property sufficient for identification;
-The principal amount, excluding interest, costs, and attorney fees, claimed by the claimant;
-The claimant’s signature or the signature of the claimant’s authorized agent;
-An acknowledgment or certificate as required under Title 57, Chapter 3, Recording of Documents; and
-If the lien is against an owner-occupied residence, as defined in Section 38–11–102, a statement meeting the requirements that the Division of Occupational and Professional Licensing by rule, describing the steps the owner of the owner-occupied residence may take to require a claimant to remove the lien as provided in Section 38–11–107.
NOTE THAT a claimant who is an original contractor or a supervising subcontractor may include in a notice of preconstruction lien the name, address, and telephone number of each subcontractor who is under contract with the claimant to provide preconstruction service that the claimant is under contract to provide. NOTE, HOWEVER, that the inclusion of a subcontractor in a notice of preconstruction lien filed by another claimant is not a substitute for the subcontractor’s own submission of a notice of preconstruction lien. [38-1a-402]
Construction Lien:
-Name of the reputed owner or, if not known, of the record owner
-Name of person by whom the claimant was employed or to whom claimant provided construction work;
-Dates when claimant first and last provided construction work;
-Description of the project property sufficient for identification;
-The name of the county in which the property is located
-Either (a) the tax parcel identification number of each parcel included in that property; or (b) the number of the building permit for the construction project on the property
-Claimant’s name, current address, and current phone number
-The amount of the claim. A claimant may have both a preconstruction lien and a construction lien on the same property. A construction lien may include the amount for preconstruction service, but a preconstruction lien cannot include amounts claimed for construction service. (NOTE that where payments are made to a subcontractor and supplier by joint check, if there is no agreement with the owner or general as to allocation, then the supplier endorsing the check will be deemed to have received the funds due. If a lien is subsequently filed, the original contractor will not be responsible for amounts that were owed to the supplier at the time they were paid jointly to the sub and supplier. [SFR, Inc. v. Comtrol, Inc, 77 P.3d 629 (Utah App. 2008)] NOTE ALSO that attorney’s fees may be reduced proportionately where amount recovered is less than amount sought. See discussion in Attorney’s fees discussion, below.) Note that the amount of the lien must not include costs and attorney’s fees. The cited case was based on the statutes before they were amended in 2012, but there does not appear to be a reason that this rule would not continue to apply. (Note that this case ruled that the original lien, which didn’t include fees and costs, was valid, but the amended liens which included fees and costs were not. It is unclear if the entire original lien would be invalid if it included fees and costs, but that is a definite possibility.) [2 Ton Plumbing, L.L.C. v. Thorgaard, — P.3d —-, 2015 WL 404592 (2015)]
-Signed by claimant or claimant’s authorized agent. Per case law, the claimant’s attorney may sign the lien. Culmer v. Clift, 14 Utah 286, 47 P. 85 (1896).
-Notice must be acknowledged
-If project is an owner-occupied residence, then claimant must include a statement describing what steps an owner may take to require the lien claimant to remove the lien.
[38-1a-502; 38-1a-203; 38-1a-301]
NOTE: A claimant may claim a preconstruction or construction lien against two or more improvements owned by the same person, but claimant must designate the amount claimed due on each [38-1a-405]
RESIDENTIAL PROJECTS:
The notice must also be included in all lien notices, for both preconstruction and construction liens. [38-1a-502]
PAYMENT BOND:
No specific provision.
BALANCE STATEMENT/AMEND-MENT TO PRELIMINARY NOTICE (also called a “Remaining to Complete”): The amendment must include:
-A good faith estimate of the total amount remaining due to complete the contract, purchase order or agreement pertaining to the claimant’s approved construction work;
-The identification of each original contractor or subcontractor with whom the claimant has a contract or contracts to provide construction work; and
-A separate statement of all known amounts or categories of work in dispute. Note that if the claimant misrepresents the amount due, with the intent to overcharge the customer or procure some other unfair advantage, the claimant may be fined. [38-1a-506]
Within 10 days after filing the balance statement, a claimant may demand a statement of adequate assurance from the owner, contractor or subcontractor with whom the claimant contracts, which may include a request for a statement from the owner, contractor or sub that the owner, contractor or sub has sufficient funds dedicated and available to pay for all sums due or to become due to the person requesting the assurance. [38-1a-506]
CLAIM FOR RETENTION PROCEEDS:
Final billing statement. [13-8-5]
14. Time to Start Suit / Foreclose?
Within 180 days after the claimant files its Notice of Construction Lien or its Notice of Preconstruction Lien, the claimant must file a notice of pendency of the action in each applicable county, and must file to enforce his or her lien. (Note that a contractor or subcontractor must be licensed in order to sue, and in the suit must allege and prove that that they were properly licensed when the contract sued upon was entered into. There is a case allowing an unlicensed contractor to sue if they can prove that the purpose of the licensing statute was satisfied.) If an owner files for bankruptcy protection before the 180-day time period expires, then the action must be filed within 90 days after the automatic stay in bankruptcy is lifted or expires. [38-1a-701; 58-55-604; Govert Copier Painting v. Van Leeuwen, 801 P.2d 863 (1990)] Amending the lien or filing a subsequent lien for the same labor or materials will not extend the deadline for filing suit, even if the project has not been completed. Foreclosure must begin within 180 days of the first time the lien is filed. [Foothill Park, LC v. Judston, Inc., 182 P.3d 924 (Utah App.,2008)] If the notice of pendency of the action isn’t timely filed, the lien is not invalidated, but it becomes void as to everyone except those named in the action to enforce the lien and those with actual knowledge of the action. [Victor Plastering, Inc. v. Swanson Building Materials, Inc., 200 P.3d 657 (Utah App.2008)] But if the lawsuit is not timely commenced, then the lien is invalidated. [Pearson v. Lamb, 121 P.3d 717 (Utah App. 2005), rehearing denied] NOTE that where the lien is against a RESIDENCE, the claimant must serve, along with the complaint, (a) instructions to the owner pertaining to the owner’s right to establish justification for releasing the lien and barring any action, and (b) an affidavit form to enable the owner to specify the grounds up on which the owner might exercise his or her rights. If these forms are not provided, the claimant is barred from enforcing his or her lien against the owner. NOTE that where the claimant is enforcing his or her claim via counterclaim against the owner, rather than with a complaint, or where the owner has no rights under the Lien Recovery Fund Act, it is not necessary to submit the notice regarding the Act, though it is always safest to submit the notice anyway. [38-1a-701; Sill v. Hart, 162 P.3d 1099, (Utah 2007)] After serving the lawsuit and the required forms (unless the claimant was prevented from doing so because of the non-paying party’s bankruptcy), the claimant must give the owner of the residence the opportunity to establish compliance with the statutes, and to obtain a certificate of compliance. This will potentially allow the claimant to recover from the residential Lien Recovery Fund. This requires that the claimant obtain judgment on the residential project, (and file a proof of claim if the judgment debtor has filed bankruptcy), and that the homeowner (1) is the owner-occupant of the property; (2) entered into a written contract with a licensed contractor; (3) obtained building permits; and (4) paid the contractor in full according to the contract. The full process for recovery is not set out here. Note, however, that where an owner obtains a certificate of compliance, the claimant will not be liable for costs or attorneys fees for damages from a civil action relating to the lien filing or foreclosure as long as the claimant removes the lien within 15 days the date the owner mails to the claimant (by certified mail) a copy of the certificate of compliance. [38-1a-701, 38-11-204, 38-11-107]
NOTE: In either residential OR non-residential, if the owner, contractor or subcontractor posts a bond or other alternate security to substitute for the lien, the claimant must file suit against that alternate security in the same time period for filing against the real property. If the claimant has already started a suit, this substitution must take place within 90 days after the party posting the alternate security is served with the summons and complaint in the lien foreclosure action. Also, within 90 days of receiving notice of the bond or other security, the claimant must begin proceedings to add the alternate security to the foreclosure suit. If the claimant does not receive the required notice of the alternate security, but learns of it anyway, then they must add it to the foreclosure proceedings within 6 months of learning of it. HOWEVER, no action may be commenced more than 2 years after notice of the alternate security is actually recorded. [38-1a-804]
NOTE that if the owner, original contractor, or subcontractor disputes the correctness or validity of the lien claimed, they may petition the court within 90 days after the first summons is served in an action to foreclose the lien, seeking a summary determination of the correct amount of the lien, for the sole purpose of providing alternate security. The numerous details of this process are not set out here. [38-1a-804]
CLAIM AGAINST THE CON-TRACTOR’S PAYMENT BOND:
More than 90 days but less than one year after claimant’s last work or delivery. [14-2-1; 14-2-5]
CLAIM AGAINST THE OWNER FOR FAILURE TO OBTAIN A PAYMENT BOND:
Within one year after claimant’s last delivery. [Schor at §45.02[D][3][a]]
LACK OF ADEQUATE ASSURANCE: A claimant who has demanded adequate assurance of sufficient funds may sue his or her customer where, after the demand, the customer (i) fails to provide adequate assurance of sufficient available funds; or (ii) the parties disagree, in good faith, as to whether there are adequate funds or financing available to pay for completion of the project. If the court finds that the customer has failed to provide adequate assurance, the court may require the owner, contractor or sub to post adequate security with the court to assure timely payment of the contract balance. [38-1a-506]
CLAIM FOR RETENTION PROCEEDS:
No specific provision. The original contractor must wait at least until after the time frame set out in the ‘final notice’ sections has expired, and a subcontractor must wait at least ten days after the party with whom they contracted has received payment of the retention. [13-8-5]