Liens are automatically created when a person provides construction services on a piece of real property. The lien is an encumbrance that attaches to the owner’s interest in the property, and all that the lien claimant needs to do to create the lien is provide the construction services. Nothing more is required.
However, this right to a construction lien is quickly lost forever if the person providing the construction services does not file or record certain notices. As explained in an earlier post, the first major step to preserving a construction lien—commonly referred to as a mechanic’s lien—is filing a preliminary notice. In this post, I explain the next step: recording a notice of construction lien. I also outline the remaining basic requirements to preserve and enforce a lien under Utah law.
What is a Notice of Construction Lien?
Up until the point of recording a notice of construction lien, the only required notice has been a preliminary notice, a filing made with the Utah State Construction Registry. A notice of construction lien is filed (or recorded) elsewhere—with the county recorder’s office in the county where the property is located. (For example, a notice of construction lien for a property located in Salt Lake County must be recorded in the Salt Lake County recorder’s office.)
Again, recording a notice of construction lien does not create a lien. If a lien right has been properly preserved up to this point, recording a notice of construction lien merely further preserves this right and ensures that the lien claimant can later seek payment through pursuing a lien foreclosure, if needed. In most cases, it puts pressure on the landowner—and perhaps a contractor or subcontractor who did not pay the lien claimant—so that the lien claimant can leverage full payment or a settlement without the need to file a lawsuit to foreclose on the lien. If the lien claimant has already lost or forfeited the lien, the notice of construction lien cannot resurrect the lien claim.
Pursuant to Utah law, a notice of construction lien must contain certain information regarding the construction project and the work the lien claimant did there:
- The name of the owner of the construction property
- A description of the construction property (a legal description or address that allows it to properly be identified)
- The name of the person that hired the lien claimant to provide the construction services on the property
- The time frame in which the lien claimant provided the construction services on the property
- The lien claimant’s name, address, phone number
- The amount the lien claimant is owed for the construction services
- An acknowledged (or notarized) signature of the lien claimant or its agent
- If the construction lien is a personal residence, a notice of certain protections afforded to the property owner
Within 30 days of recording a notice of construction lien, the lien claimant must send a copy of the notice to the owner by certified mail. Importantly, if the lien claimant does not do this, it cannot recover costs and attorney fees against the owner if the lien claimant later needs to enforce the construction lien through a foreclosure action.
When Must a Notice of Construction Lien Be Recorded?
If a person who provides construction services on a property does not get paid, it is wise to have a notice of construction lien recorded fairly quickly. The cost to prepare and record this notice is relatively small. For example, the recording fee in Utah County is $40.00. However, the same urgency that exists with a preliminary notice, which must be filed within 20 days of beginning the construction services, does not exist with recording a notice of construction lien. Although the deadline to record depends on the circumstances, the lien claimant will almost always have at least a few months to record.
Generally, a notice of construction lien must be filed either 180 days after the original contract reaches final completion or 90 days after a notice of completion is filed with the Utah State Construction Registry. Let me break these deadlines down. The original contract is usually the contract between the owner and the general contractor, and all subcontractors and suppliers are generally hired pursuant to this general contract, whether hired directly by the general contractor or indirectly by a subcontractor or supplier to the general contractor. Once the original contract reaches final completion, the lien claimant will have—at most—180 days to file the notice of construction lien. A general contract reaches final completion when one of the following occurs: 1) the local government entity issues a permanent certificate of occupancy or conducts a final inspection (if no certificate of occupancy is required); 2) all substantial work on the construction project is completed (if no certificate of occupancy or final inspection is required); or 3) an original contract is terminated for whatever reason and no work continues.
The 180-day timeline is not guaranteed. If a notice of completion is filed with the Utah State Construction Registry, the window to record a notice of construction lien moves from 180 days down to 90 days. A notice of completion can be filed by an owner, original contractor, lender, or other parties with an interest in the subject property. The purpose of this filing is to shorten the time in which lien claimants must come forward and assert their rights so that there is more certainty moving forward with the next steps related to the property such as, for example, the sale of the property.
Sometimes a subcontractor provides substantial work after a certificate of occupancy is issued or after a final inspection is completed. In these cases, the subcontractor has 180 days after completing his work to record a notice of construction lien.
What Happens If a Notice of Construction Lien Is Not Filed?
This is almost certainly fatal. If a person who provides construction services on a project does not record a notice of construction lien within the applicable timeline set forth above, the lien claimant’s rights are almost certainly lost. And if that person thereafter seeks to assert a lien claim by recording a notice of construction lien, he puts himself in danger of being sued for recording a wrongful lien. The penalties for recording a wrongful lien are enough to think twice before moving forward with recording a late notice of construction lien.
What Must a Person Do After Recording a Notice of Construction Lien?
Filing a preliminary notice and then recording a notice of construction lien are the first two steps of several required to preserve and enforce a lien claim. The next steps include the following:
- Filing a legal action to enforce the construction lien through foreclosure, which action must be filed within 180 days of recording the notice of construction lien
- Along with filing the legal action, recording a lis pendens with the country recorder’s office, providing notice of the pending legal action
- Prevailing in the legal action and receiving an order from the court to sell the property where the construction services were provided to recover the amounts owing under the construction lien claim
Need Help with a Notice of Construction Lien or Other Lien Issues?
This post explains only the second of several key steps in preserving and enforcing a construction lien claim. It certainly does not explain everything you should know both before or after this point. The world of construction lien claims can be quite complex, so consulting with an attorney is very helpful. If you have any questions regarding notices of construction liens and other issues concerning construction lien claims, give me a call. I am happy to help, and I offer a free consultation. My direct dial is 801-365-1021, and you can e-mail me at [email protected].