Full text of lien law revision bills:

Utah Legislature HB0115:  Mechanic Lien Amendments (pdf) (html)
Utah Legislature HB0260: Mechanic Lien Revisions (pdf) (html)

A New Category of Liens:  Preconstruction Liens

One substantial change to Utah’s lien laws is the creation of a new category of work that qualifies for mechanic lien filings:  “Pre-Construction Services.” Utah Code 38-1-2 was amended to create this new definition of services and liens:

(13) “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 service 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.

Any party who provides such “preconstruction services” will now have the right to file a lien against the property for these services even if work never is performed on the property. While this may seem a small change at first glance, it’s pretty significant when you consider the purposes of mechanic lien laws.

As discussed in our Short History of the Mechanic Lien post, a construction participant is given a privilege in property based on work or materials incorporated into an improvement. While there are always exceptions, this incorporation requirement has been a primary consideration in lien laws across the nation for 200 years.

Here, the “preconstruction services” creates a specific type of lien for construction type services that may never get tangibly incorporated into any property or building.  Interestingly, the U.C. 38-1-3 states that a person may claim both a preconstruction and a construction lien on the same property separately. One peculiarity that may cause problems for Utah contractors in the future is that a construction lien may include an amount claimed for preconstruction services, but a preconstruction lien may not include an amount claimed for construction services.

To claim a Preconstruction Lien, the claimant must file a “Notice of Preconstruction Lien” within 90 days after completing preconstruction services. This notice must be actually filed with the county recorder for the county where the property is located, as submitting to the State Construction Registry (SCR) is not provided by the statues. The lien notice must meet statutory requirements, and must be sent to the property owner within 30 days of filing.

Notice of Retention for Preconstruction Services

Whenever a construction participant starts performing pre-construction services, they must file a “Notice of Rentention” with the State Construction Registry within 20 days of beginning that work to preserve their right to later file a mechanic lien for these services.

The failure to file a Notice of Rention results in a complete loss of lien rights for the pre-construction services.

Preliminary Notice Almost Always Required

Prior to these 2011 amendments, subcontractors and material suppliers were excused from filing a preliminary notice if a notice of commencement was not timely filed on the project. This exception, however, has now been eliminated.  Now, unless you are an individual laborer working for wages, you must always file a preliminary notice to preserve your lien rights to file a construction services lien.

Lien Priority Clarifications

When money gets tight on a construction project, Lien Priority issues can become very important. We’ve addressed lien priority issues on this blog under the tag: Lien Priority. The most common lien priority issue is the tension between a mechanic lien filing and a construction loan or property mortgage. Which has priority over the other?

Except in a minority of jurisdictions (i.e. Virginia), the first document filed in county records is the one with priority over others. The question with mechanic’s liens is whether they are effective at the time of recording, or if they relate back to the time when the construction work began.

Prior to these Utah lien law amendments, a mechanic lien related back to the date when the lien claimant first delivered labor or materials. The rule changes effective August 1, 2011, make the rules even more favorable to the lien claimant, now relating all the way back to when construction first began on the entire project, or the date of the first filing of a preliminary notice (depending on circumstances, project type, services type, etc.).  While there are some complications here that affect which priority date sticks, the big-picture change is that the lien priority date is earlier than previously provided.

Restriction on Waiving Lien Rights

Some states allow contractors or suppliers to waive their right to lien before they ever begin work, or before they get paid. Other states prohibit this. We wrote about this situation previously on this blog.  With the new Utah lien law revisions, Utah joins the states that prohibit lien waivers before payment.  The new provision specifically provides:

38-1-29. No waiver of rights — Exception — Payment applied first to preconstruction service lien.

(1) (a) A right or privilege under this chapter may not be waived or limited by contract.(b) A provision of a contract purporting to waive or limit a right or privilege under this chapter is void.

Subscribe to our Feed to Monitor Lien Law Changes

Whenever lien laws are changed across the country, we post about them and throw the post into our “Lien Law Alerts” category. The state affected by the lien law change is tagged with the state name (in this case, Utah).  If you’d like to monitor these law changes, you can subscribe to the category feed, the applicable tag feed, or the blog’s general feed.  It’s a great way to get free updates on lien law changes across the country.

Plus, since keeping up with lien law changes across the country is hard, this presents another reason why it’s smart to outsource your preliminary notice and mechanic lien work to a company like Zlien, who monitors the nuances of lien laws. For more reasons why you should use a service like Zlien, check out this blog post:  Why You Shouldn’t Use Do-It-Yourself Mechanic Lien and Notice Forms.

Long Answer:

What Types of Notices Are There?  Are They Mandatory?

While the term “notice” gets used a great deal in construction circles, many contractors do not understand what is meant by “notice.” Is it a “notice of intent to lien?” Is it a pre-work “preliminary notice?”  All notices are not the same, and that was the subject of a useful blog post on this Construction Lien Blog: All Notices Are Not Created Equal: Preliminary Notice v. Notice of Intent to Lien

This is a great comparison of the differences between preliminary notices (which are sent at the start of a project before any payment is overdue) and notices of intent (which are sent when you unpaid).  Notices are not required in every state, and for the states that do require notices, the types of notices required a different.

A run-down of which states require notices and which do not are available on this blog here: Is Notice Required In My State? List of Notice and Non-Notice States. Remember also that our LienPilot can calculate your notice requirements based on your job information.

How Are Preliminary Notices Sent?

This is a very important question. In fact, if your state requires certain notices, and you send them but send them incorrectly, it may be just as bad as not sending them at all. Accordingly, sending the notice as required by statute is very, very important.  And you guessed it: Delivery requirements are different in every state.

It’s safe to say that most states require preliminary notices be sent by certified mail, or certified mail with return receipt requested. There are some instances, however, when notices must be sent by registered mail only, by mail with restricted delivery, hand delivered by courier, and/or actually filed with the county recorder.

Just as important as delivering the notice correctly is proving that you delivered the notice. California has some pretty strict requirements in this regard, which can give you an idea of what you’ll confront in proving preliminary notice delivery elsewhere.  We wrote a blog post about this here:  Strict Proof of Delivery May Be Required for Construction Notices.

This is called a preliminary notice or notice to owner (NTO).    Simply put, it is a written document usually sent certified mail return receipt requested that formally notifies the property owner and any higher tiered contractors that your company is on the project and that you expect to get paid.

In the event you’re unpaid, and you gave the required notice, the property owner and/or upper tiered contractors may be liable to pay you directly (after you file a lien).

If you don’t deliver the required notice, you’re largely out of luck, and you can only pursue payment from the person you directly contracted with.

That’s a very, very general overview of how preliminary notices work across the country.   It gets sticky when you look into the details of each state, however, as every state has different notice requirements and deadlines.

Zlien has great free resources for contractors, subcontractors, equipment lessors and suppliers looking for some clarity on whether notices are required and when they must be delivered.    Check out their free “Lien Law Punchlists,” organized by states.   They also have a “National State-By-State Lien Law and Deadline” publication.

As with every general rule, however, there are certain exceptions.  In limited circumstances, Preliminary Notices may be required on private construction projects.

In Georgia, Preliminary Notices are required when:

(1) The claimant does not have contractual privity with the owner (i.e. is a general contractor) or the general contractor (i.e. is a subcontractor).   Therefore, the claimant is a lower-level sub or supplier;  and

(2) The Owner or Contractor has filed a Notice of Commencement within 15 days of first performing work on the project.

If these two conditions are met, a preliminary notice must be sent to the Contractor and the Owner via registered or certified mail.   The notice must be sent within 30 days of the first delivering of services of materials by the claimant or from the filing of the Notice of Commencement (whichever is later).

If required, failure to send a preliminary notice is fatal to the claimants ability to file a mechanic’s lien.

Zlien sends & files preliminary notices for $35.00 each.   You can also download the form for no charge.

It will be to any contractors’ benefit to review this article online, access which habits apply to you, and make an effort to avoid the costly mistakes.  Any progress will help increase your bottom line.

The seven habits highlighted are:

1)    The “Gentlemen’s Agreement” – A Handshake and Your Word.   Bottom line:  Get it in writing.
2)    Using Contracts that Fall Short of the Legal Requirements.
3)    Not Getting Every Change Order in Writing.
4)    Failing to invoice immediately.
5)    Failing to serve a preliminary 20-day notice (pre-lien construction notices)
6)    Don’t Worry – They Will “Take Care of You” on the Next Job
7)    It isn’t good “customer service” to record a Mechanic’s Lien

Did you know that you can go a step further from simply sending this notice…and actually file the notice with the county recording office?

The benefit of filing the preliminary notice with the county recorder is that the county recorder will mail to the filing party (you) a notification if and when the property owner files a notice of completion or cessation. As discussed on the Zlien blog, the filing of these documents can affect your Liening Window. Receiving notification of its filing from teh county recorder, therefore, can be an enormous asset.

While this is a great benefit, be weary of relying on the recorder completely. The law is clear that your lien period will not be extended if the recorder fails to make this mailing to you.

Zlien, Inc. delivers preliminary notices to property owners and general contractors for $35.00 per notice. We can file your prelim notice with the county recorder and request notification of any future relevant filings for an additional $75.00 per notice.

This notice is commonly referred to as “Preliminary 20-day Notice,” and contrary to popular belief, the notice must be sent to the required parties before work begins, and not simply before a lien is filed.

What is Preliminary 20-Day Notice?
California Civil Code § 3097 provides that notice “means a written notice from a claimant that is given prior to the recording of a mechanic’s lien…”

The California preliminary notice requirements are similar to the requirements of other states, and they purport to serve the following general purpose: to notify the property owner that the property may be liened in the event of non-payment.

A construction lien carries severe consequences to the property owner. If a property owner pays the general contractor, and it fails to pay its subs, through a construction lien the owner may be obligated to pay twice on the project! Most states require preliminary notice to ensure that the owner is notified of who is and who is not working on his property.

The form of California’s Preliminary Notice
California statute requires that preliminary notices contain specific information. Civ. Code § 3097(c) provides that the notice must contain the following:

• General description of the labor, service, equipment or materials furnished, or to be furnished, and an estimate of its total price;
• Name and address of person furnishing the labor, service, etc.
• Name of person who contracted for the purchase of that labor, service, equipment, etc.
• Description of the jobsite sufficient for identification
• The following statement in bold face type:
  NOTICE TO PROPERTY OWNER

  If bills are not paid in full for the labor, services, equipment or materials furnished or to be furnished, a mechanic’s lien leading to the loss, through court foreclosure proceedings, of all or part of your property being so improved may be placed against the property even though you have paid your contractor in full. You may wish to protect yourself against this consequence by (1) requiring your contractor to furnish a signed release by the person or firm giving you this notice before making payment to your contractor, or (2) any other method or device that is appropriate under the circumstances. Other than residential homeowners of dwellings containing fewer than five units, private project owners must notify the original contractor and any lien claimant who has provided the owner with a preliminary 20-day lien notice in accordance with Section 3097 of the Civil Code that a notice of completion or notice of cessation has been recorded within 10 days of its recordation. Notice shall be by registered mail, certified mail, or first-class mail, evidenced by a certificate of mailing. Failure to notify will extend the deadlines to record a lien.

Since these requirements are set forth by statute, and lien statutes are typically strictly construed, it is important that your preliminary notice meet the requirements of Civ. Code §3097(c).

A Free Template of a California Preliminary Notice form can be downloaded here: California Preliminary Notice Template & Proof of Service Affidavit

Who Must Provide Notice
As discussed above, not everyone is required to provide this preliminary notice. There are many circumstances when a contractor or supplier can lien a project when they have not sent preliminary notice.

The key question, therefore, is clearly this: Who must provide Preliminary Notice?

The general rule of thumb in California is that Preliminary Notice is required by anyone who is not:

1. In direct contract with the owner; or
2. Performing actual labor, as an employee or as part of a labor union.

In other words, if you are an actual laborer or the party who contracted directly with the owner, you need not send preliminary notice to file a lien.

Interestingly, California courts have very liberally construed the phrase “direct contract with the owner” to include other parties aside from those who actually signed the contract with the owner.

In California, any contractor or materialman is presumed to be under “direct contract” with the owner so long as the owner has actual knowledge that construction work is being performed on his property! Kim v. JF Enterprises (App 2. Dist. 1996) 50 Cal. Rptr. 2d 141, 42 Cal. App. 4th 849.

Where to Send Notice
Assuming you are required to send Preliminary Notice, the California statutes stipulate exactly who is required to receive that notice to properly preserve a contractor or supplier’s lien rights.

The Preliminary Notice should be sent to:

• The Owner (or reputed owner);
• The Original Contractor (or reputed original contractor); and
• The construction lender, if any.

When to Send Notice
Perhaps the most important question about preliminary notice in California concerns when the statutes require that notice be delivered by a contractor or supplier.

In California, notice must be given not later than 20 days after the claimant has first furnished labor, services, equipment or materials to the jobsite.

After the expiration of these 20 days, the claimant may still send notice, but it will only be effective as to the labor, services and materials supplied or provided within 20 days prior to the service of the notice (and thereafter).

Therefore, if you are required to provide preliminary notice under California statutes, it’s imperative that you deliver the notice as soon as practical. Waiting until 20 days after you begin work will jeopardize your rights to lien for unpaid work.

How to Send Notice
California statutes specifically provide a method for sending notice to the receiving parties.

The notice can be sent by delivering the document personally, by leaving it at the residence or place of business of the party with some person in charge, or by registered or certified first-class mail.

If the owner is out of state and the above-methods do not work, you can send the owner’s notice via certified or registered mail to the construction lender or original contractor.

It is important to keep good records of delivery, as the statutes also provide a specific method to prove the preliminary notice was delivered. According to §3097.1, proving delivery of preliminary notice must be as follows:

• If served by mail, by proof of service affidavit accompanied by return receipt card or a photocopy of the record of delivery;
• If served personally, by proof of service affidavit.

A proof of service affidavit is an affidavit by the person making service (the person who hand delivered the notice or mailed the notice). It should state the time, place and manner of service and the facts showing that the delivery was made in accordance with statutes.