38-1-28 - Notice of release of lien and substitution of alternate security.
38-1-28. Notice of release of lien and substitution of alternate security.
(1) The owner of any interest in real property that is subject to a mechanics' lien recordedunder this chapter, or any original contractor or subcontractor affected by the lien, who disputesthe correctness or validity of the lien may record a notice of release of lien and substitution ofalternate security:
(a) that meets the requirements of Subsection (2);
(b) in the office of the county recorder where the lien was recorded; and
(c) at any time before the expiration of 90 days after the day on which the person filing anotice of release of lien and substitution of alternate security is served with a summons and lienforeclosure complaint.
(2) A notice of release of lien and substitution of alternate security recorded underSubsection (1) shall:
(a) meet the requirements for the recording of documents in Title 57, Chapter 3,Recording of Documents;
(b) reference the lien sought to be released, including an entry number, book number, andpage number; and
(c) have as an attachment a surety bond or evidence of a cash deposit that:
(i) (A) if a surety bond, is executed by a surety company that is treasury listed, A-rated byAM Best Company, and authorized to issue surety bonds in this state; or
(B) if evidence of a cash deposit, meets the requirements established by rule by theDepartment of Commerce in accordance with Title 63G, Chapter 3, Utah AdministrativeRulemaking Act;
(ii) is in an amount equal to:
(A) 150% of the amount claimed by the lien claimant on a notice of lien or determinedunder Subsection (7), if the lien claim is for $25,000 or more;
(B) 175% of the amount claimed by the lien claimant on a notice of lien or determinedunder Subsection (7), if the lien claim is for at least $15,000 but less than $25,000; or
(C) 200% of the amount claimed by the lien claimant on a notice of lien or determinedunder Subsection (7), if the lien claim is for less than $15,000;
(iii) is made payable to the lien claimant;
(iv) is conditioned for the payment of:
(A) the judgment that would have been rendered, or has been rendered against theproperty in the action to enforce the lien; and
(B) any costs and attorneys' fees awarded by the court; and
(v) has as principal:
(A) the owner of the interest in the real property; or
(B) the original contractor or subcontractor affected by the lien.
(3) (a) Upon the recording of the notice of release of lien and substitution of alternatesecurity under Subsection (1), the real property described in the notice shall be released from themechanics' lien to which the notice applies.
(b) A recorded notice of release of lien and substitution of alternate security is effectiveas to any amendment to the lien being released if the bond amount remains enough to satisfy therequirements of Subsection (2)(c)(ii).
(4) (a) Upon the recording of a notice of release of lien and substitution of alternatesecurity under Subsection (1), the person recording the notice shall serve a copy of the notice,
together with any attachments, within 30 days upon the lien claimant.
(b) If a suit is pending to foreclose the lien at the time the notice is served upon the lienclaimant under Subsection (4)(a), the lien claimant shall, within 90 days from the receipt of thenotice, institute proceedings to add the alternate security as a party to the lien foreclosure suit.
(5) The alternate security attached to a notice of release of lien shall be discharged andreleased upon:
(a) the failure of the lien claimant to commence a suit against the alternate securitywithin the same time as an action to enforce the lien under Section 38-1-11;
(b) the failure of the lien claimant to institute proceedings to add the alternate security asa party to a lien foreclosure suit within the time required by Subsection (4)(b);
(c) the dismissal with prejudice of the lien foreclosure suit or suit against the alternatesecurity as to the lien claimant; or
(d) the entry of judgment against the lien claimant in:
(i) a lien foreclosure suit; or
(ii) suit against the alternate security.
(6) If a copy of the notice of release of lien and substitution of alternate security is notserved upon the lien claimant as provided in Subsection (4)(a), the lien claimant shall have sixmonths after the discovery of the notice to commence an action against the alternate security,except that no action may be commenced against the alternate security after two years from thedate the notice was recorded.
(7) (a) The owner of any interest in real property that is subject to a mechanics' lienrecorded under this chapter or an original contractor or subcontractor affected by a mechanics'lien recorded under this chapter who disputes the amount claimed in a notice of lien may petitionthe district court in the county in which the notice of lien is recorded for a summarydetermination of the correct amount of a lien claim for the sole purpose of providing alternatesecurity.
(b) A petition under this Subsection (7) shall:
(i) state with specificity the factual and legal bases for disputing the amount of the lienclaim; and
(ii) be supported by a sworn affidavit and any other evidence supporting the petition.
(c) A petitioner under Subsection (7)(a) shall, under Utah Rules of Civil Procedure, Rule4, serve on the lien claimant:
(i) a copy of the petition; and
(ii) a notice of hearing if a hearing is scheduled.
(d) If a court finds a petition under Subsection (7)(a) insufficient, the court may dismissthe petition without a hearing.
(e) If a court finds a petition under Subsection (7)(a) sufficient, the court shall schedule ahearing within 10 days to determine the correct amount of the lien claim for the sole purpose ofproviding alternate security.
(f) A lien claimant may:
(i) attend a hearing held under this Subsection (7); and
(ii) contest the petition.
(g) A determination under this section is limited to a determination of the amount of thelien claim for the sole purpose of providing alternate security and does not conclusively establish:
(i) the amount to which the lien claimant is entitled;
(ii) the validity of the lien claim; or
(iii) any person's right to any other legal remedy.
(h) If a court, in a proceeding under this Subsection (7), determines that the amountclaimed in a notice of claim is excessive, the court shall set the amount of the lien claim for thesole purpose of providing alternate security.
(i) In an order under Subsection (7)(h), the court shall include a legal description of theproperty.
(j) A petitioner under this Subsection (7) may record a certified copy of any order issuedunder this Subsection (7) in the county in which the lien is recorded.
(k) Attorneys' fees may not be awarded for a proceeding under this Subsection (7), butshall be considered in any award of attorneys' fees under any other provision of this chapter.
Amended by Chapter 382, 2008 General Session