Rep. Norm Thurston — Voting Record

Bill

Number

H.B. 422 First Substitute (2020GS)

Sponsor

Rep. Roberts, M.

Final action

House/ filed 3/12/2020

Outcome

Failed / filed without passage

Summary

What it does

• This bill:
• defines terms;
• amends provisions related to the relation back and priority of liens;
• removes the requirement that an owner file a notice of intent to obtain final completion;
• amends provisions regarding a notice of intent to finance and enacts provisions regarding a notice of intent to finance construction;
• enacts provisions related to a notice of progress and a notice of final lien;
• amends provisions regarding a failure to provide notice; and
• makes technical and conforming changes.

Every vote on this bill

Bill text

PRECONSTRUCTION AND CONSTRUCTION LIENS
AMENDMENTS
GENERAL SESSION
STATE OF UTAH
Chief Sponsor: Marc K. Roberts
Senate Sponsor: 
____________
LONG TITLE
General Description:
This bill amends provisions of Preconstruction and Construction Liens.
Highlighted Provisions:
This bill:
▸ defines terms;
▸ amends provisions related to the relation back and priority of liens;
▸ removes the requirement that an owner file a notice of intent to obtain final
completion;
▸ amends provisions regarding a notice of intent to finance and enacts provisions
regarding a notice of intent to finance construction;
▸ enacts provisions related to a notice of progress and a notice of final lien;
▸ amends provisions regarding a failure to provide notice; and
▸ makes technical and conforming changes.
Money Appropriated in this Bill:
None
Other Special Clauses:
None
Utah Code Sections Affected:
AMENDS:
38-1a-102
, as last amended by Laws of Utah 2019, Chapter 250
38-1a-503
, as last amended by Laws of Utah 2014, Chapter 293
38-1a-506
, as renumbered and amended by Laws of Utah 2012, Chapter 278
38-1a-603
, as enacted by Laws of Utah 2019, Chapter 250
38-1a-604
, as enacted by Laws of Utah 2019, Chapter 250
38-1a-805
, as enacted by Laws of Utah 2015, Chapter 303
ENACTS:
38-1a-605
, Utah Code Annotated 1953
38-1a-606
, Utah Code Annotated 1953
Be it enacted by the Legislature of the state of Utah:
Section 1. Section 
38-1a-102
 is amended to read:
38-1a-102.
Definitions.
As used in this chapter:
(1) "Alternate means" means a method of filing a legible and complete notice or other
document with the registry other than electronically, as established by the division by rule.
(2) "Anticipated improvement" means the improvement:
(a) for which preconstruction service is performed; and
(b) that is anticipated to follow the performing of preconstruction service.
(3) "Applicable county recorder" means the office of the recorder of each county in
which any part of the property on which a claimant claims or intends to claim a preconstruction
or construction lien is located.
(4) "Bona fide loan" means a loan to an owner or owner-builder by a lender in which
the owner or owner-builder has no financial or beneficial interest greater than 5% of the voting
shares or other ownership interest.
(5) "Claimant" means a person entitled to claim a preconstruction or construction lien.
(6) "Compensation" means the payment of money for a service rendered or an expense
incurred, whether based on:
(a) time and expense, lump sum, stipulated sum, percentage of cost, cost plus fixed or
percentage fee, or commission; or
(b) a combination of the bases listed in Subsection (6)(a).
(7) "Construction lender" means a person who makes a construction loan.
(8) "Construction lien" means a lien under this chapter for construction work.
(9) "Construction loan" does not include a consumer loan secured by the equity in the
consumer's home.
(10) "Construction modification" means a modification or amendment to a mortgage or
trust deed that secures a construction loan that:
(a) (i) extends the maturity date of the construction loan;
(ii) revises the interest rate of the construction loan;
(iii) advances additional funds to the construction loan;
(iv) increases a reserve amount of the construction loan;
(v) adds or removes collateral of the construction loan;
(vi) adds or removes borrowers of the construction loan; or
(vii) is similar to a modification or amendment described in Subsections (10)(a)(i)
through (vi) and changes the terms of the construction loan; and
(b) is a modification or amendment to secure funds for the purpose of preconstruction
services or construction work.
[
(10)
] 
(11)
 "Construction project" means an improvement that is constructed pursuant
to an original contract.
[
(11)
] 
(12)
 "Construction work":
(a) means labor, service, material, or equipment provided for the purpose and during
the process of constructing, altering, or repairing an improvement; and
(b) includes scheduling, estimating, staking, supervising, managing, materials testing,
inspection, observation, and quality control or assurance involved in constructing, altering, or
repairing an improvement.
[
(12)
] 
(13)
 "Contestable notice" means a notice of preconstruction service under
Section 
38-1a-401
, a preliminary notice under Section 
38-1a-501
, or a notice of completion
under Section 
38-1a-506
.
[
(13)
] 
(14)
 "Contesting person" means an owner, original contractor, subcontractor, or
other interested person.
[
(14)
] 
(15)
 "Designated agent" means the third party the division contracts with as
provided in Section 
38-1a-202
 to create and maintain the registry.
[
(15)
] 
(16)
 "Division" means the Division of Occupational and Professional Licensing
created in Section 
58-1-103
.
[
(16)
] 
(17)
 "Entry number" means the reference number that:
(a) the designated agent assigns to each notice or other document filed with the
registry; and
(b) is unique for each notice or other document.
[
(17)
] 
(18)
 "Final completion" means:
(a) the date of issuance of a permanent certificate of occupancy by the local
government entity having jurisdiction over the construction project, if a permanent certificate
of occupancy is required;
(b) the date of the final inspection of the construction work by the local government
entity having jurisdiction over the construction project, if an inspection is required under a
state-adopted building code applicable to the construction work, but no certificate of occupancy
is required;
(c) unless the owner is holding payment to ensure completion of construction work, the
date on which there remains no substantial work to be completed to finish the construction
work under the original contract, if a certificate of occupancy is not required and a final
inspection is not required under an applicable state-adopted building code; or
(d) the last date on which substantial work was performed under the original contract,
if, because the original contract is terminated before completion of the construction work
defined by the original contract, the local government entity having jurisdiction over the
construction project does not issue a certificate of occupancy or perform a final inspection.
[
(18)
] 
(19)
 "Final lien waiver" means a form that complies with Subsection
38-1a-802
(4)(c).
[
(19)
] 
(20)
 "First preliminary notice filing" means a preliminary notice that:
(a) is the earliest preliminary notice filed on the construction project for which the
preliminary notice is filed;
(b) is filed on a construction project that, at the time the preliminary notice is filed, has
not reached final completion; and
(c) is not cancelled under Section 
38-1a-307
.
[
(20)
] 
(21)
 "Government project-identifying information" has the same meaning as
defined in Section 
38-1b-102
.
[
(21)
] 
(22)
 "Improvement" means:
(a) a building, infrastructure, utility, or other human-made structure or object
constructed on or for and affixed to real property; or
(b) a repair, modification, or alteration of a building, infrastructure, utility, or object
referred to in Subsection [
(21)
] 
(22)
(a).
[
(22)
] 
(23)
 "Interested person" means a person that may be affected by a construction
project.
[
(23)
] 
(24)
 "Notice of commencement" means a notice required under Section
38-1b-201
 for a government project, as defined in Section 
38-1b-102
.
[
(24)
] 
(25)
 "Original contract":
(a) means a contract between an owner and an original contractor for preconstruction
service or construction work; and
(b) does not include a contract between an owner-builder and another person.
[
(25)
] 
(26)
 "Original contractor" means a person, including an owner-builder, that
contracts with an owner to provide preconstruction service or construction work.
[
(26)
] 
(27)
 "Owner" means the person that owns the project property.
[
(27)
] 
(28)
 "Owner-builder" means an owner, including an owner who is also an
original contractor, who:
(a) contracts with one or more other persons for preconstruction service or construction
work for an improvement on the owner's real property; and
(b) obtains a building permit for the improvement.
[
(28)
] 
(29)
 "Preconstruction lien" means a lien under this chapter for a preconstruction
service.
[
(29)
] 
(30)
 "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 work 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.
[
(30)
] 
(31)
 "Private project" means a construction project that is not a government
project.
(32) "Progress waiver" means a form that complies with Subsection 
38-1a-802
(4)(b).
[
(31)
] 
(33)
 "Project property" means the real property on or for which preconstruction
service or construction work is or will be provided.
[
(32)
] 
(34)
 "Registry" means the State Construction Registry under Part 2, State
Construction Registry.
[
(33)
] 
(35)
 "Required notice" means:
(a) a notice of preconstruction service under Section 
38-1a-401
;
(b) a preliminary notice under Section 
38-1a-501
 or Section 
38-1b-202
;
(c) a notice of commencement;
(d) a notice of construction loan under Section 
38-1a-601
;
(e) a notice under Section 
38-1a-602
 concerning a construction loan default;
(f) a notice of intent to obtain final completion under Section 
38-1a-506
; or
(g) a notice of completion under Section 
38-1a-507
.
[
(34)
] 
(36)
 "Subcontractor" means a person that contracts to provide preconstruction
service or construction work to:
(a) a person other than the owner; or
(b) the owner, if the owner is an owner-builder.
[
(35)
] 
(37)
 "Substantial work" does not include repair work or warranty work.
[
(36)
] 
(38)
 "Supervisory subcontractor" means a person that:
(a) is a subcontractor under contract to provide preconstruction service or construction
work; and
(b) contracts with one or more other subcontractors for the other subcontractor or
subcontractors to provide preconstruction service or construction work that the person is under
contract to provide.
Section 2. Section 
38-1a-503
 is amended to read:
38-1a-503.
Relation back and priority of liens.
(1) A construction lien relates back to, and takes effect as of, the time of the first
preliminary notice filing.
(2) (a) Subject to Subsection (2)(b), a construction lien has priority over:
(i) any lien, mortgage, or other encumbrance that attaches after the first preliminary
notice filing; and
(ii) any lien, mortgage, or other encumbrance of which the claimant had no notice and
which was unrecorded at the time of the first preliminary notice filing.
(b) A recorded mortgage or trust deed that secures a construction loan 
or a recorded
construction modification
 attaches immediately before the first preliminary notice filing for the
construction project if each claimant that has a preliminary notice on file on the construction
project before the mortgage [
or
]
,
 trust deed
, or construction modification
 was recorded receives
full payment for all construction work the claimant performed before the mortgage [
or
]
,
 trust
deed
, or construction modification
 was recorded, regardless of whether the claimant receives
full payment before or after the day on which the mortgage [
or
]
,
 trust deed
, or construction
modification
 is recorded.
Section 3. Section 
38-1a-506
 is amended to read:
38-1a-506.
Notice of intent to obtain final completion.
(1) An owner, as defined in Section 
14-2-1
, of a nonresidential construction project
that is registered with the registry, or an original contractor of a commercial nonresidential
construction project that is registered with the registry under Section 
38-1a-501
, [
shall
] 
may
file with the registry a notice of intent to obtain final completion as provided in this section if:
(a) the completion of performance time under the original contract for construction
work is greater than 120 days;
(b) the total original construction contract price exceeds $500,000; and
(c) the original contractor or owner has not obtained a payment bond in accordance
with Section 
14-2-1
.
(2) [
The
] 
If filed, the
 notice of intent described in Subsection (1) shall be filed at least
45 days before the day on which the owner or original contractor of a commercial
nonresidential construction project files or could have filed a notice of completion under
Section 
38-1a-507
.
(3) A person who provides construction work to an owner or original contractor who
files a notice of intent in accordance with Subsection (1) shall file an amendment to the
person's preliminary notice previously filed by the person as required in Section 
38-1a-501
:
(a) that includes:
(i) a good faith estimate of the total amount remaining due to complete the contract,
purchase order, or agreement relating to the person's approved construction work;
(ii) the identification of each original contractor or subcontractor with whom the
person has a contract or contracts for providing construction work; and
(iii) a separate statement of all known amounts or categories of work in dispute; and
(b) no later than 20 days after the day on which the owner or contractor files a notice of
intent.
(4) (a) A person described in Subsection (3) may demand a statement of adequate
assurance from the owner, contractor, or subcontractor with whom the person has privity of
contract no later than 10 days after the day on which the person files a balance statement in
accordance with Subsection (3) from an owner, contractor, or subcontractor who is in privity of
contract with the person.
(b) A demand for adequate assurance as described in Subsection (4)(a) may include a
request for a statement from the owner, contractor, or subcontractor that the owner, contractor,
or subcontractor has sufficient funds dedicated and available to pay for all sums due to the
person filing for the adequate assurances or that will become due in order to complete a
construction project.
(c) A person who demands adequate assurance under Subsection (4)(a) shall deliver
copies of the demand to the owner and contractor:
(i) by hand delivery with a responsible party's acknowledgment of receipt;
(ii) by certified mail with a return receipt; or
(iii) as provided under Rule 4, Utah Rules of Civil Procedure.
(5) (a) A person described in Subsection (3) may bring a legal action against a party
with whom the person is in privity of contract, including a request for injunctive or declaratory
relief, to determine the adequacy of the funds of the owner, contractor, or subcontractor with
whom the demanding person contracted if, after the person demands adequate assurance in
accordance with the requirements of this section:
(i) the owner, contractor, or subcontractor fails to provide adequate assurance that the
owner, contractor, or subcontractor has sufficient available funds, or access to financing or
other sufficient available funds, to pay for the completion of the demanding person's approved
work on the construction project; or
(ii) the parties disagree, in good faith, as to whether there are adequate funds, or access
to financing or other sufficient available funds, to pay for the completion of the demanding
person's approved work on the construction project.
(b) If a court finds that an owner, contractor, or subcontractor has failed to provide
adequate assurance in accordance with Subsection (4)(a), the court may require the owner,
contractor, or subcontractor to post adequate security with the court sufficient to assure timely
payment of the remaining contract balance for the approved work of the person seeking
adequate assurance, including:
(i) cash;
(ii) a bond;
(iii) an irrevocable letter of credit;
(iv) property;
(v) financing; or
(vi) another form of security approved by the court.
(6) (a) A person is subject to the civil penalty described in Subsection (6)(b), if the
person files a balance statement described in Subsection (3) that misrepresents the amount due
under the contract with the intent to:
(i) charge an owner, contractor, or subcontractor more than the actual amount due; or
(ii) procure any other unfair advantage or benefit on the person's behalf.
(b) The civil penalty described in Subsection (6)(a) is the greater of:
(i) twice the amount by which the balance statement filed under Subsection (3) exceeds
the amount actually remaining due under the contract for completion of construction; and
(ii) the actual damages incurred by the owner, contractor, or subcontractor.
(7) A court shall award reasonable attorney fees to a prevailing party for an action
brought under this section.
(8) Failure to comply with the requirements established in this section does not affect
any other requirement or right under this chapter.
(9) A person who has not filed a preliminary notice as required under Section
38-1a-501
 is not entitled to a right or a remedy provided in this section.
(10) This section does not create a cause of action against a person with whom the
demanding party is not in privity of contract.
Section 4. Section 
38-1a-603
 is amended to read:
38-1a-603.
Notice of intent to finance.
(1) An owner may file with the registry a notice of intent to finance.
(2) A notice of intent to finance under Subsection (1) shall state:
(a) the anticipated date on which financing will occur;
(b) the anticipated lender's name, address, and telephone number;
(c) the name of the trustor on the trust deed securing the [
anticipated loan
] 
financing
;
(d) the tax parcel identification number of each parcel included in the project property;
and
(e) the name of the county in which the project property is located.
(3) If an owner chooses to file a notice of intent to finance, the owner shall file the
notice of intent to finance no less than 14 days before the date on which the financing is
anticipated to occur.
(4) If the financing does not occur within 30 days after the anticipated date specified in
the notice of intent to finance, the notice of intent to finance shall automatically have no effect
and shall be removed from the registry.
Section 5. Section 
38-1a-604
 is amended to read:
38-1a-604.
Notice of final lien waiver.
(1) After a notice of intent to finance is filed under Section 
38-1a-603
or a notice of
intent to finance construction is filed under Section 
38-1a-605
 on a project property, each
subcontractor that has filed a preliminary notice pertaining to the project property may file with
the registry a final lien waiver.
(2) The final lien waiver described in Subsection (1)
:
(a)
 may be filed on the registry even if no notice of intent to finance was filed on the
registry[
.
]
; and
(b) may state that no amount is owed.
Section 6. Section 
38-1a-605
 is enacted to read:
 38-1a-605.
Notice of intent to finance construction.
(1) An owner may file with the registry a notice of intent to finance construction.
(2) A notice of intent to finance construction under Subsection (1) shall state:
(a) the anticipated date on which construction financing will occur;
(b) the anticipated lender's name, address, and telephone number;
(c) the name of the trustor on the trust deed securing the construction financing;
(d) the tax parcel identification number of each parcel included in the project property;
and
(e) the name of the county in which the project property is located.
Section 7. Section 
38-1a-606
 is enacted to read:
 38-1a-606.
Notice of progress waiver.
(1) After a notice of intent to finance construction is filed under Section 
38-1a-605
 or a
notice of intent to finance is filed under Section 
38-1a-603
 on a project property, a
subcontractor that files a preliminary notice pertaining to the project property may file with the
registry a progress waiver, if the subcontractor:
(a) is owed money under the original contract; or
(b) anticipates performing additional services under the original contract.
(2) A progress waiver described in Subsection (1) may state that no amount is currently
owed.
Section 8. Section 
38-1a-805
 is amended to read:
38-1a-805.
Failure to file notice -- Petition to nullify preconstruction or
construction lien -- Expedited proceeding.
(1) An owner of an interest in a project property that is subject to a recorded
preconstruction lien or a recorded construction lien may petition the district court in the county
in which the project property is located for summary relief to nullify the preconstruction lien or
the construction lien if:
(a) the owner claims that the preconstruction lien or the construction lien is invalid
because:
(i) the lien claimant did not timely file a notice of preconstruction service under
Section 
38-1a-401
; or
(ii) the lien claimant did not timely file a preliminary notice under Section 
38-1a-501
;
(b) the owner sent the lien claimant a written request to withdraw in accordance with
Subsection (2); and
(c) the lien claimant did not withdraw the preconstruction lien or the construction lien
within 10 business days after the day on which the owner sent the written request to withdraw.
(2) A written request to withdraw described in Subsection (1) shall:
(a) be delivered by certified mail to the lien claimant at the lien claimant's address
provided in the recorded preconstruction lien or the recorded construction lien;
(b) state the owner's name, address, and telephone number;
(c) contain:
(i) (A) the name of the county in which the property that is subject to the
preconstruction lien or the construction lien is located; and
(B) the tax parcel identification number of each parcel that is subject to the
preconstruction lien or the construction lien; or
(ii) a legal description of the property that is subject to the preconstruction lien or the
construction lien;
(d) state that the lien claimant has failed to timely file:
(i) a notice of preconstruction service under Section 
38-1a-401
; or
(ii) a preliminary notice under Section 
38-1a-501
;
(e) request that the lien claimant withdraw the lien claimant's preconstruction lien or
construction lien within 10 business days after the day on which the written request to
withdraw is sent; and
(f) state that if the lien claimant does not withdraw the preconstruction lien or the
construction lien within 10 business days after the day on which the written request to
withdraw is sent, the owner may petition a court to nullify the lien in an expedited proceeding
under this section.
(3) A petition under Subsection (1) shall:
(a) state with specificity that:
(i) the lien claimant's preconstruction lien or the lien claimant's construction lien is
invalid because the lien claimant did not file a notice of preconstruction service or a
preliminary notice, as applicable;
(ii) the petitioner sent the lien claimant a written request to withdraw in accordance
with Subsection (2); and
(iii) the lien claimant did not withdraw the preconstruction lien or the construction lien
within 10 business days after the day on which the owner sent the written request to withdraw;
(b) be supported by a sworn affidavit of the petitioner; and
(c) be served on the lien claimant, in accordance with the Rules of Civil Procedure,
within three business days after the day on which the petitioner files the petition in the district
court.
(4) (a) If the court finds that a petition does not meet the requirements described in
Subsection (3), the court may dismiss the petition without a hearing.
(b) If the court finds that a petition meets the requirements described in Subsection (3),
the court shall schedule an expedited hearing to determine whether the preconstruction lien or
the construction lien is invalid because [
the lien claimant failed to file a notice of
preconstruction service or a preliminary notice,
] 
the notice of preconstruction service or
preliminary notice is not filed within the time period described in Subsection 
38-1a-401
(1) or
38-1a-501
(1),
 as applicable.
(5) (a) If the court grants a hearing, within three business days after the day on which
the court schedules the hearing and at least seven business days before the day on which the
hearing is scheduled, the petitioner shall serve on the lien claimant, in accordance with the
Rules of Civil Procedure, a copy of the petition, notice of the hearing, and a copy of the court's
order granting the expedited hearing.
(b) The lien claimant may attend the hearing and contest the petition.
(6) An expedited proceeding under this section may only determine:
(a) whether the lien claimant filed a notice of preconstruction service or a preliminary
notice; and
(b) if the lien claimant failed to file a notice of preconstruction service or a preliminary
notice, whether the lien claimant's preconstruction lien or construction lien is valid.
(7) (a) If, following a hearing, the court determines that the preconstruction lien or the
construction lien is invalid, the court shall issue an order that:
(i) contains a legal description of the property;
(ii) declares the preconstruction lien or the construction lien void ab initio;
(iii) releases the property from the lien; and
(iv) awards costs and reasonable attorney fees to the petitioner.
(b) The petitioner may submit a copy of an order issued under Subsection (7)(a) to the
county recorder for recording.
(8) (a) If, following a hearing, the court determines that the preconstruction lien or the
construction lien is valid, the court shall:
(i) dismiss the petition; and
(ii) award costs and reasonable attorney fees to the lien claimant.
(b) The dismissal order shall contain a legal description of the property.
(c) The lien claimant may submit a copy of the dismissal order to the county recorder
for recording.
(9) If a petition under this section contains a claim for damages, the proceedings related
to the claim for damages may not be expedited under this section.