As the world turns, mechanic’s lien laws are changed by legislatures across the country. On average, at least five substantial changes occur each year across the country, and this year, the state of Utah’s number has been called. The legislature has passed two bills that modifies mechanics lien laws, with the majority of these changes to take effect starting August 1, 2011. This post summarizes those changes.
Full text of lien law revision bills:
A New Category of Liens: Preconstruction Liens
One substantial change to Utah’s lien laws is the creation of a new category of work that qualifies for mechanic lien filings: “Pre-Construction Services.” Utah Code 38-1-2 was amended to create this new definition of services and liens:
(13) “Preconstruction service”:
(a) means to plan or design, or to assist in the planning or design of, an improvement or a proposed improvement: (i) before construction of the improvement commences; and (ii) for compensation separate from any compensation paid or to be paid for construction service for the improvement; and
(b) includes consulting, conducting a site investigation or assessment, programming,preconstruction cost or quantity estimating, preconstruction scheduling, performing a preconstruction construction feasibility review, procuring construction services, and preparing a study, report, rendering, model, boundary or topographic survey, plat, map, design, plan, drawing, specification, or contract document.
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Any party who provides such “preconstruction services” will now have the right to file a lien against the property for these services even if work never is performed on the property. While this may seem a small change at first glance, it’s pretty significant when you consider the purposes of mechanic lien laws.
As discussed in our Short History of the Mechanic Lien post, a construction participant is given a privilege in property based on work or materials incorporated into an improvement. While there are always exceptions, this incorporation requirement has been a primary consideration in lien laws across the nation for 200 years.
Here, the “preconstruction services” creates a specific type of lien for construction type services that may never get tangibly incorporated into any property or building. Interestingly, the U.C. 38-1-3 states that a person may claim both a preconstruction and a construction lien on the same property separately. One peculiarity that may cause problems for Utah contractors in the future is that a construction lien may include an amount claimed for preconstruction services, but a preconstruction lien may not include an amount claimed for construction services.
To claim a Preconstruction Lien, the claimant must file a “Notice of Preconstruction Lien” within 90 days after completing preconstruction services. This notice must be actually filed with the county recorder for the county where the property is located, as submitting to the State Construction Registry (SCR) is not provided by the statues. The lien notice must meet statutory requirements, and must be sent to the property owner within 30 days of filing.
Notice of Retention for Preconstruction Services
Whenever a construction participant starts performing pre-construction services, they must file a “Notice of Retention” with the State Construction Registry within 20 days of beginning that work to preserve their right to later file a mechanic lien for these services.
The failure to file a Notice of Rention results in a complete loss of lien rights for the pre-construction services.
Preliminary Notice Almost Always Required
Prior to these 2011 amendments, subcontractors and material suppliers were excused from filing a preliminary notice if a notice of commencement was not timely filed on the project. This exception, however, has now been eliminated. Now, unless you are an individual laborer working for wages, you must always file a preliminary notice to preserve your lien rights to file a construction services lien.
Lien Priority Clarifications
When money gets tight on a construction project, Lien Priority issues can become very important. We’ve addressed lien priority issues on this blog under the tag: Lien Priority. The most common lien priority issue is the tension between a mechanic lien filing and a construction loan or property mortgage. Which has priority over the other?
Except in a minority of jurisdictions (i.e. Virginia), the first document filed in county records is the one with priority over others. The question with mechanic’s liens is whether they are effective at the time of recording, or if they relate back to the time when the construction work began.
Prior to these Utah lien law amendments, a mechanic lien related back to the date when the lien claimant first delivered labor or materials. The rule changes effective August 1, 2011, make the rules even more favorable to the lien claimant, now relating all the way back to when construction first began on the entire project, or the date of the first filing of a preliminary notice (depending on circumstances, project type, services type, etc.). While there are some complications here that affect which priority date sticks, the big-picture change is that the lien priority date is earlier than previously provided.
Restriction on Waiving Lien Rights
Some states allow contractors or suppliers to waive their right to lien before they ever begin work, or before they get paid. Other states prohibit this. We wrote about this situation previously on this blog. With the new Utah lien law revisions, Utah joins the states that prohibit lien waivers before payment. The new provision specifically provides:
38-1-29. No waiver of rights — Exception — Payment applied first to preconstruction service lien.
(1) (a) A right or privilege under this chapter may not be waived or limited by contract.(b) A provision of a contract purporting to waive or limit a right or privilege under this chapter is void.
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Whenever lien laws are changed across the country, we post about them and throw the post into our “Lien Law Alerts” category. The state affected by the lien law change is tagged with the state name (in this case, Utah). If you’d like to monitor these law changes, you can subscribe to the category feed, the applicable tag feed, or the blog’s general feed. It’s a great way to get free updates on lien law changes across the country.
Plus, since keeping up with lien law changes across the country is hard, this presents another reason why it’s smart to outsource your preliminary notice and mechanic lien work to a company like levelset, who monitors the nuances of lien laws. For more reasons why you should use a service like Levelset , check out this blog post: Why You Shouldn’t Use Do-It-Yourself Mechanic Lien and Notice Forms.