Getting Paid Faster with Liens, Bonds - Utah Webinar

In this webinar, hosted by SunRay Construction Solutions and Jason Robinson, Founding Shareholder & Director at Babcock Scott & Babcock, we explore what mechanics liens are, why they matter, how to preserve lien rights, and the process of filing a lien in Utah. Additionally, we cover payment bonds for both public and private projects in Utah, with a focus on the state’s specific legal requirements. The webinar also includes a discussion on the Utah Lien Recovery Fund.

What Is a Mechanics Lien?

A mechanics lien is an involuntary encumbrance against the title of real property, serving as a legal claim to ensure payment for work performed or materials supplied. Unlike a voluntary encumbrance, such as a mortgage, a mechanics lien is filed when a contractor, subcontractor, or supplier has not been paid for their contributions to a construction project. This lien provides leverage, allowing unpaid parties to seek compensation by potentially forcing the sale of the property.

Each state has its own mechanics lien laws, making it essential for construction professionals to familiarize themselves with Utah’s specific requirements before starting work.

The Security Interest of a Mechanics Lien

A mechanics lien provides a security interest in real property improvements, ensuring that those who contribute labor, services, or materials have a means to recover unpaid amounts. Once filed, a lien grants the right to foreclose on the property if payment is not made. This can lead to an owner paying twice—first to the general contractor and again to resolve a subcontractor’s lien if payment did not properly flow down the chain. To prevent such issues, Utah has strict notice and filing requirements to ensure transparency and communication.

Who Can File a Mechanics Lien?

Mechanics liens in Utah apply to all construction-related work. Those eligible to file include contractors, subcontractors, suppliers, and professionals providing services such as scheduling, estimating, surveying, and quality control.

Preserving Lien Rights in Utah

To protect lien rights, construction professionals must follow these key steps:

1. File a Preliminary Notice – A timely, properly filed preliminary notice is required through the Utah State Construction Registry (SCR).

2. File a Mechanics Lien on Time – Liens must be recorded within the statutory deadline.

3. Notify the Owner of the Lien – Utah law mandates that property owners be informed of the lien filing.

4. Commence a Foreclosure Action – If unpaid, a foreclosure action must be initiated within the statutory deadline.

For specific deadlines related to your Utah project, visit: Utah Deadlines & Requirements.

The Utah State Construction Registry (SCR)

The SCR is an online system that provides transparency in construction payments by tracking project participants and document filings. It enables owners to issue joint checks, collect lien waivers, and verify the proper distribution of funds.

Filing a Preliminary Notice in Utah

For private projects, all contractors, subcontractors, and suppliers must file a preliminary notice on the SCR within 20 days of their first workday. Late filings only protect future work and do not retroactively secure prior contributions.

Required Information for Preliminary Notices:

• Claimant’s information

• Owner’s information

• Debtor’s information

• Project address

• Property tax parcel ID number

The tax parcel ID must be verified through official records rather than relying on previous filings, as inaccuracies can jeopardize lien rights.

Filing a Mechanics Lien in Utah

A mechanics lien must be recorded in the county where the property is located. The deadline for filing is:

• 90 days from the date a Notice of Completion is recorded on the SCR, or

• 180 days from final completion of the original contract if no Notice of Completion is filed.

Additionally, a copy of the filed lien must be sent to the property owner via certified mail within 30 days.

Foreclosure Action on a Mechanics Lien

Once a lien is recorded, a foreclosure action must be initiated within 180 days. At the same time, a Lis Pendens (a public notice of pending litigation) must be recorded to inform potential buyers and creditors of the lienholder’s claim.

Mechanics Lien Priority in Utah

Lien priority is determined by the first-filed preliminary notice on the SCR, rather than the first visible work on the project. This system ensures clarity in determining who holds priority in payment disputes. Additionally, lenders can pay off the first preliminary notice holder to eliminate lien priority conflicts.

Bonding Off a Mechanics Lien

If an owner, lender, surety, or title company opts to bond off a mechanics lien, the lien is replaced with a bond or cash deposit. This guarantees payment without affecting property ownership, streamlining the claims process.

Utah’s Abusive Lien Statute

Utah enforces strict penalties against fraudulent or overstated mechanics liens. Any intentional misrepresentation can lead to legal consequences. Additionally, once a lien is satisfied, it must be released within 10 days to avoid further legal issues.

Common Questions Contractors Ask

Mechanics liens provide essential protection for those contributing to construction projects in Utah. Understanding how to properly file and enforce a lien ensures that contractors, subcontractors, and suppliers secure their payments. By following Utah’s legal requirements and utilizing tools like the SCR, construction professionals can navigate lien laws effectively and safeguard their rights.

1. Can you file a lien for just the retainage amount?

Yes, you can file a lien for retainage. However, the key issue is when retainage becomes due. Under Utah’s retention statute, retainage must typically be paid within 45 days of occupancy or when the space is fit for occupancy. The debate arises over whether you can file a lien before the retainage is actually owed. While it’s usually best to wait until it is due, if you're approaching your lien filing deadline, it may be wise to file to secure payment.

2. If I have filed a lien but the property is sold or the owner files for bankruptcy, does it affect my deadline to file a foreclosure lawsuit?

• If the property is sold: No, it does not affect your deadline. A mechanics lien remains attached to the property even after it is sold, meaning the new owner takes ownership subject to the recorded lien.

• If the owner files for bankruptcy: Yes, bankruptcy triggers an automatic stay, preventing you from filing a foreclosure action. Under Utah law, the deadline to file a foreclosure action is paused until the bankruptcy is resolved—either dismissed or discharged. Additionally, you may file specific documents in the bankruptcy case to establish your mechanics lien rights.

3. Does my preliminary notice need to be mailed if it is already registered on the Utah SCR site?

No, in Utah, all preliminary notices must be filed on the Utah State Construction Registry (SCR), and mailing is not required. However, while not mandatory, mailing a copy may be beneficial in some cases—especially if the owner is unaware of the SCR. More communication can sometimes help prevent payment disputes before they escalate.

For example, when Utah briefly required a Notice of Intent to Lien, many disputes were resolved before liens were even filed, simply because owners were notified in advance. This highlights the importance of communication at all stages, whether through contracts, preliminary notices, or notices of intent—strong communication is often the best tool for ensuring timely payment.