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A construction lien is an extraordinary remedy established by statute. Years ago, the lien statute in Utah referred to construction liens as mechanic's liens. Therefore, many people still refer to construction liens as mechanic's liens today.
When duly recorded, a construction lien encumbers real property, securing payment from the property itself in an amount equal to the uncompensated value of materials and labor provided for the improvement of real property. |
As such, construction liens are highly effective collection tools for lien claimants such as design professionals, contractors, subcontractors and suppliers who are not fully paid for work and materials furnished on construction projects.
The lien claimant, however, must substantially comply with the statute to preserve his or her lien rights. Failure to jump through all of hoops generally results in the forfeiture of lien rights. Among the most common errors is the failure to record a preliminary notice with the Utah State Construction Registry.
Furthermore, wrongfully recording a construction lien can result in substantial penalties. Under the statute, real property owners enjoy meaningful protection against abusive lien practices in Utah.
Owners can reduce the risks of lien claims by requiring the contractor and his subs to bond the project. Generally, owners are well advised to require two types of bonds, payment bonds and performance bonds. Payment bonds are intended to cover lien claims asserted by unpaid subcontractors and suppliers. Performance bonds are intended to cover costs of completing construction when the contractor abandons the project or otherwise fails to perform under the construction contract. Payment and performance bonds are required on most public projects, and owners of private commercial projects exceeding a certain amount are required in Utah to obtain a payment bond from the contractor.
Construction lien and bond issues are complicated and risky matters. Therefore, claimants and owners should employ the assistance of competent construction law attorneys when confronting these issues.
The lien claimant, however, must substantially comply with the statute to preserve his or her lien rights. Failure to jump through all of hoops generally results in the forfeiture of lien rights. Among the most common errors is the failure to record a preliminary notice with the Utah State Construction Registry.
Furthermore, wrongfully recording a construction lien can result in substantial penalties. Under the statute, real property owners enjoy meaningful protection against abusive lien practices in Utah.
Owners can reduce the risks of lien claims by requiring the contractor and his subs to bond the project. Generally, owners are well advised to require two types of bonds, payment bonds and performance bonds. Payment bonds are intended to cover lien claims asserted by unpaid subcontractors and suppliers. Performance bonds are intended to cover costs of completing construction when the contractor abandons the project or otherwise fails to perform under the construction contract. Payment and performance bonds are required on most public projects, and owners of private commercial projects exceeding a certain amount are required in Utah to obtain a payment bond from the contractor.
Construction lien and bond issues are complicated and risky matters. Therefore, claimants and owners should employ the assistance of competent construction law attorneys when confronting these issues.