by D. Scott DeGraffenried
Utah’s Mechanics’ Lien Law comprises a technical area of the law involving many requirements and deadlines. The nuances of Utah’s Mechanics’ Lien Law have caused attorneys to wake up in the middle of the night hoping they complied with certain steps or did not miss one of the many imposed deadlines. Just when construction law attorneys thought we had the system mastered, the Utah Legislature made sweeping changes to Utah’s Mechanics’ Lien Law. See Utah Code Ann. §§ 38-1-1 to 38-1-37 (Supp. 2011). During the 2011 general session, the legislature passed two bills, House Bills 115 and 260, that created two types of mechanics’ liens. H.B. 115 created liens for preconstruction services, which are services provided before actual construction commences, such as design, architectural, engineering, and surveying work. H.B. 260 applies to liens for construction services, which are tasks performed in the physical construction of a project. Both bills are now in effect. This article is limited to H.B. 115. The purpose of this article is to explain some of the motivations behind the bill and introduce the mechanics (no pun intended) of the newly-created preconstruction service liens.
The Push for H.B. 115
Utah’s previous mechanics’ lien statutes gave lien rights to preconstruction service providers. The problem, however, has been defining the priority of their liens. Mechanics’ lien litigation often comes down to one issue: whether a mechanics’ lien has priority over other encumbrances on a particular piece of property. This dispute is often referred to as one of “broken priority.” The dispute usually involves the mechanics’ lien claimants and the bank that holds a trust deed on the property. Under Utah’s pre-2011 statutes, all mechanics’ liens related back to and took effect as of the date visible construction work commenced on a project. This triggering point is known as the relation back doctrine. If visible work commenced before another encumbrance was recorded, all the lien claimants had priority over the later encumbrance.
The problem for those performing preconstruction services was that they were always at the mercy of construction commencing. An architect could spend months designing a project, performing significant services. If actual construction never commenced, however, no date was established for the architect’s lien priority.
Similarly, if a preconstruction service provider performed services before a trust deed was recorded but construction began after the recording of the trust deed, the provider’s lien fell in with the rest of the lien claimants. The lien would be deemed inferior to the trust deed. Simply put, preconstruction service providers were often relegated to an inferior priority position even though they performed their services early in the project.