As I have explained earlier, liens are automatically created when a worker, contractor, subcontractor, supplier, or other person or entity provides construction services on real property. Although nothing more is required to create this lien, the lien claimant quickly loses the lien forever if he doesn’t take certain steps to preserve the lien, including the first steps of filing a preliminary notice and later recording a notice of lien. This post explains the next steps to preserving and enforcing a lien under Utah law: filing a lien enforcement action and, at the same time, recording a lis pendens.
What is a Lien Foreclosure Action?
Stated simply, the lien foreclosure action is the legal battle where the court and a judge get involved to resolve the lien claim. It is initiated by the filing of a lawsuit with the court that alleges that money is owed pursuant to the lien claim, and the property where the services were provided should be sold to satisfy this owed amount. The owner of the property or other interested parties can defend the claim, perhaps attempting to show that the lien is invalid or that the underlying work is less valuable than claimed such that the amount claimed should be reduced.
What is a Lis Pendens?
Along with filing a legal action in a Utah court, a lien claimant also must record a document called a “lis pendens.” This fancy Latin word basically means that a lawsuit is pending, and by recording a lis pendens in the county recorder’s office where the property is located, the lien claimant gives notice to the world (or at least he is deemed to give notice, even if nobody checks what is recorded) that the property is encumbered by a lawsuit. If a party tries to sell the property, a title company will discover the lis pendens, and the sale may not go through because the title company may not want to provide title insurance. A potential buyer of the property also is warned, thanks to the lis pendens, that he is purchasing the property with the potential risk that the property is sold in a foreclosure, which would extinguish the new purchaser’s ownership rights.
When Must a Complaint Be Filed and a Lis Pendens Be Recorded?
Under Utah law, a complaint must be filed with a court and a lis pendens recorded with the county recorder’s office within 180 days after the notice of lien was recorded. This deadline is very strict. Importantly, 180 days is approximately six months, but if a lien claimant files and records six months later, this date is likely outside of the 180-day window. For example, if a lien claimant files a notice of lien on January 1 and then files and records on July 1, exactly six months later, he is too late. 182 days have passed.
What Happens If a Notice of Construction Lien Is Not Filed?
Like failing to file a preliminary notice or notice of lien, failing to file a lien enforcement action and record a lis pendens in the required timeline is fatal to the lien claim—the lien is void. If a person tries to enforce a lien after this timeline expires (at a time that the lien no longer exists), this person has likely engaged in conduct that subjects him to liability under Utah’s wrongful lien statute. The penalties for recording a wrongful lien are quite harsh. Anyone who seeks to enforce a lien after failing to timely file a lien foreclosure complaint or a lis pendens should beware.
What Must a Person Do After Filing a Lien Foreclosure Action and Recording a Lis Pendens?
The next step is winning the lawsuit. The lien claimant must prevail in the litigation and receive an order from the court that allows him to sell the property where the construction services were provided. Doing so is essentially the final step in recovering the amounts owed under the construction lien claim. This final step is the end of a process that may take a very, very long time. It would not be abnormal if the eventual sale of the property and recovery of the money occurred several years after the original work was provided. The good news is that the final recovery can include an award of attorney fees and interest that have accrued along the way. More likely than not, however, a lien foreclosure claim will not go the distance. If a lien claimant has properly preserved his rights, the owner of the property will likely feel and succumb to the pressure to pay the lien claimant and avoid a judgment, foreclosure sale, and loss of the property.
Need Help with a Notice of Construction Lien or Other Lien Issues?
I have briefly explained only one of several key steps in preserving and enforcing a construction lien claim. I by no means set forth in any real detail this or other steps required to succeed in asserting a lien claim. Construction lien claims can be quite complex, so it is wise to consult with an attorney with construction lien experience. If you have any questions regarding enforcing 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].