Utah court prevents waiving lien rights contractors

Typically, when a court strictly construes mechanics lien statutes, it spells bad news for the lien claimant. The opposite occurred in a recent Utah case, where the Utah Court of Appeals strictly protected a mechanic lien claimant’s rights against waiver of those rights. This meant reinstating the original claim and denying a “final draw” request as a valid Utah lien waiver.

Facts: Utah Lien Waiver Signed But Not Statutory Form

Utah Code 38-1a-802 provides that a lien “waiver and release” must be in “substantially the [same] form” as provided for within the statute itself, and the statute goes on to provide a Utah lien waiver form example.

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In the case of Lane Myers Construction LLC v Countrywide Home Loans Inc et al, decided by the Utah Court of Appeals on September 27, 2012, the contractor who filed a mechanics lien had submitted a “Final Draw” request to the lender in a form provided by the lender.  This form had language included referencing the contractor’s lien rights, and waiving the same with language such as “no liens or claims that may result in liens exist against the above-described property…”

The language within the draw requests certainly alluded to a lien waiver, but it also did not follow the exact form set forth in U.C. 38-1a-802.

The lender asserted that the language in the draw requests had created a “lien release” pursuant to Utah’s code. The trial court agreed and dismissed the lien claim.

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Ruling: Lien Waiver Form Must Strictly Comply To Have Effect

The appeals court reversed the trial court’s determination that the lien was invalid, reinstating the mechanics lien claim and ruling that the draw requests language was not enough to waive the claimant’s mechanics lien rights like a Utah lien waiver.

First, the court makes the purposes of Utah’s mechanics lien statutes clear:

The purpose and intent of Utah’s Mechanics’ Lien Act manifestly has been to protect, at all hazards, those who perform the labor and furnish the materials which enter into the construction of a building or other improvement…We [therefore] construe the lien statutes broadly to effectuate that purpose.

Anyone who has read our blog posts about the nationwide battle between strict and liberal statutory construction knows that the “purpose” and “intent” of a state’s mechanics lien act is very important when faced with a decision about the validity of a lien claim in face of a defect or challenge.

Therefore, with this favorable mindset toward the mechanics lien claimant, the appeals court turned to the question of what precisely constitutes a valid waive of lien rights. “[T]he legislature,” the court notes, “did not leave unaddressed the standard that an enforceable waiver and release must meet.”

In the Countrywide case, it was clear that the lien waiver was not in the exact same form as the statute provided.  The question was whether the form was “substantially the same” to make it effective.  To meet this “substantially the same” benchmark, the form used would have to hit on all the component parts of the sample form:

By deciding to include templates with particular language, rather than simply identifying the requisite elements of a waiver and release more generally, and by requiring that a waiver and release be “in substantially the form provided,” the legislature has indicated its intent that a valid waiver and release at least contain each of the component parts the form includes, in substance and effect if not in the identical language.

The standard wasn’t met this in case, and therefore, the waiver language within the draw request was rejected and not a valid Utah lien waiver. Whether this case gets appealed to the Supreme Court remains to be seen.

Summary
Utah Lien Waivers: Court Strictly Protects Mechanics Lien Rights
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Utah Lien Waivers: Court Strictly Protects Mechanics Lien Rights
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A court ruled for a Utah lien waiver to be valid, the correct form must be used. This overruled a lower courts decision that lien rights had been waived.
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Levelset
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