The 2015 Legislative Session in Utah came to a close earlier this year and the lien laws once again got a makeover, although not as significant as prior changes the past few years. Prior to this session, the biggest change affected the priority of liens. It remains the best practice to eliminate the risk of a worthless paper judgment by filing a pre-lien notice on Utah’s State Construction Registry (SCR). By doing so, claimants provide themselves with lien and bond rights that in most circumstances increase their chances of collecting on the judgment or forcing a settlement. Last year, changes were made so that a construction lien relates back to, and has a priority date as of the first pre-lien notice filed on the project. So, any trust deed or mortgage secured after the first pre-lien notice would be subordinate to all lien claimants. This may only be temporary, as a lender may take priority over the first pre-lien notice by paying those lien claimants in full for all construction work performed before the trust deed is recorded. Prior to last year, under the 2011 law, lien claimants who were paid in full by the lender up to the date of recording the trust deed were required by title companies to withdraw their pre-lien notices from the SCR. This created problems when that lien claimant continued to do work on the project, thus making it necessary for them to have to re-file a pre-lien for future work. Now, there is no longer a requirement to withdraw the SCR filing when the claimant is paid by a lender up to the date of the recording of the trust deed. This eliminates the hassle of having to re-file a pre-lien notice and possibly being subject to the five day late penalty. Thus, people filing pre-lien notices are not required to withdraw them, even if a bank or title company demands that they do so.

The most noteworthy changes in 2015 concern disposing of purportedly invalid or excessive liens. There has been a good deal of litigation in Utah over what constitutes a “wrongful lien,” and this change provides some help. Under House Bill 46, now law in Utah, if a lien claimant files a lien without a pre-lien notice or with a defective pre-lien notice, the owner has the ability to file a petition with the district court to nullify and void that lien. This is an expedited process to remove the lien in a matter of weeks. Prior to filing a petition to nullify a lien, an owner must provide a safe harbor notice to the lien claimant with an opportunity to withdraw the lien within 10 days of the notice. If they fail to withdraw the lien, then the owner may file the petition with the court and obtain an expedited hearing to determine the validity of the lien. The prevailing party is entitled to attorney fees and costs incurred in the petition action.

In addition, if a lien notice claims an amount that is excessive, there is a new procedure available for challenging this as well. For residential projects in which the amount at issue is less than $50,000, the parties can agree to an arbitration process. Candidly, imposing an arbitration process into the mix of resolving a lien dispute may not offer much relief to the parties, as they are required to share the expenses of the arbitrator and the rules of civil procedure and rules of evidence still apply. If a party disagrees with an arbitrator’s decision, a trial de novo in district court is available after the parties are given 60 days more to do additional discovery. While efforts to make lien dispute resolution more efficient should be applauded, it appears that one of this year’s changes only added more hoops to the resolution process. However, if the added hoops do in fact have the effect of further discouraging parties from engaging in a formal resolution process, then perhaps the goal of reducing disputes is closer to being met than originally appears.