As a real estate investor myself, I work with many contractors. As I’ve worked with contractors, a mechanics lien can be a valuable tool for them to ensure receipt of payment for work rendered. However, like any legal remedy, there are both benefits and drawbacks to using a mechanic’s lien. Here are three pros and cons to consider:
- Payment Security: By placing a mechanics lien on a property, contractors can safeguard themselves against non-payment. This can provide peace of mind and help them to focus on completing their work, knowing that they will be compensated for their efforts.
- Legal Recourse: Mechanic’s liens provide contractors with a legal claim to a property if payment is not received. This can be a powerful tool to help contractors recover the compensation they are owed, especially if they are facing difficulty collecting payment through other means.
- Timely Payment: Mechanic’s liens can encourage property owners to make timely payments to contractors. This can help to ensure that contractors are paid promptly, which is essential for managing cash flow and keeping projects moving forward.
- Time and Cost: Placing a mechanic’s lien on a property can be a time-consuming and expensive process. It typically involves filing paperwork, providing notice to the property owner, and going through a legal process. This can be a drain on time and resources, especially for small contractors.
- Strained Relationships: Mechanic’s liens can strain relationships between contractors and property owners. The process can be adversarial and may lead to mistrust and hostility. This can be especially problematic in cases where the contractor hopes to do additional work for the property owner in the future.
- Limited Success: While mechanic’s liens can be effective in some cases, they are not always successful. Property owners may dispute the lien, and if the contractor is not able to prove their claim, the lien may be invalidated. This can leave the contractor without legal recourse to recover payment.
Mechanics Lien in Utah
If you are a Utah resident facing a mechanics lien, sometimes called a construction lien, here’s nine frequently asked I have gathered from my experience over that past 12 years.
1 – How Does a Mechanics Lien Work?
A construction lien is a legally binding lien made against any property by a contractor, subcontractor or supplier designed to protect from the risk of not being paid for services rendered. Though typically thought of as a last resort, a construction lien can result in foreclosure until paid; more often than not, the deed will effectively bar sales of the property, however. Property owners can obtain a waiver or release of lien from subcontractors and material suppliers during the course of construction which would prohibit a lien if a contractor does not effectively pay for services and materials rendered in a contract.
2 – When Are Construction Liens Filed In Utah?
A construction lien must be filed within 90 days from the last date services or materials were provided, or within 180 days after the completion of the original contract. However, the state of Utah also allows pre-construction liens for services such as architects, surveyors and designers which can be filed within 90 days from the date their services or materials were last provided. Recent changes to state law state that any party that may have a lien right must file a preliminary notice with the State Construction Registry within 20 days of commencing its own work on a project.
3 – What Is Contained In A Utah Mechanics Lien?
In Utah, a construction lien will typically include:
- A notarized preliminary lien notice filed within 20 days of beginning work or delivery of materials indicating the homeowner is liable for payment of services rendered
- A minimum amount of detail about the debt (the amount, services rendered for which payment is due and the homeowner’s name and address.) In addition:
- It must be filed with the local county court or registrar of deeds where the property is located within 180 days of the completion of work
- A contractor or supplier must initiate a lawsuit to enforce the debt within the same period of filing the lien.
4 – Is A Notice Attesting To A Paid Lien Required To Sell My Home?
Yes. The claimant of any lien filed can cause it to be canceled within ten days of payment of both the full amount plus any additional costs and fees by providing notice at the county court or registry where it was filed.
5 – How Do I Know If A Lien Has Been Filed Against My Home?
By contacting your county recorder, clerk, or assessor’s office in person or online, or by contacting your title company.
6 – What Is A Wrongful Utah Construction Lien?
A wrongful lien is any lien that is not authorized by either state or federal statute, a state court order or any authorizing document signed by a property owner. If you believe a wrongful lien has been placed on your home, you can ask the court in which it was filed for an injunction to remove it by filing a petition. If found valid, the court will issue a temporary ex parte order, which must be responded to within ten days of its order.
7 – How Do I Release A Construction Lien?
Typically, full payment and any additional fees for filing, legal services and cancellation will allow for the release of a construction lien. As indicated previously however, subcontractors and suppliers may also file a lien against your property for unpaid services—even if you have satisfied a written agreement with a contractor. A waiver or release of lien can be subsequently obtained during the course of construction to ensure liability from damages.
8 – What is the Residence Lien Restriction and Lien Recovery Fund Act?
The Utah Residence Lien Restriction and Lien Recovery Fund Act was passed in 1994 to defend homeowners from unscrupulous construction liens being fully enforced through foreclosure. It does not prohibit the filing of a lien, however; and qualification frequently needs to be proven in a court.
To qualify, a homeowner must:
- Contract in writing with either a licensed contractor, a contractor exempt from licensing under the Utah Construction Trades Licensing Act or a real estate developer for the purchase of or construction on a single-family or duplex residence
- Pay the contract price in full upon conclusion of the contract
- Occupy the property as a primary or secondary residence within 180 days of completion of construction or rent it to a tenant or lessee who occupies it as a primary or secondary residence within 180 days of completion of construction.
9 – How Frequently Are Construction Liens Filed?
Generally speaking, you may find many contractors might be willing to extend the terms of a contract or discuss alternate forms of payment rather than filing or enforcing a mechanics lien in Utah. Not only are there various legal complexities in place designed to help protect homeowners, the process itself is relatively time consuming and must be filed within stringently enforced periods. And many contractors simply may not have the time to seek foreclosure over $2,000.
But if your invoiced bill is considerably larger? That’s another matter altogether. Especially if they put in months of labor into remodeling. Months of labor which could have been spent more productively.
If you are dealing with a Utah construction lien we can help at GaryBuysHouses. We buy homes “as is”. Yes, that means encumbered property. Whatever situation you are in reach out to us here and in 10 minutes or less we will give you a fair cash offer for your home or property that has liens from any source. We have a professional legal team standing by to make the whole process run smoothly for you.
Please call or text (801) 382-9199 with any questions