Residence Lien Recovery Fund
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EFFECTIVE MAY 8, 2018:
LIEN RECOVERY FUND (LRF) INITIAL ASSESSMENT FEE IS NO LONGER REQUIRED ON NEW CONTRACTOR APPLICATIONS AND NO SPECIAL ASSESSMENTS WILL BE ISSUED.
ATTENTION: Architects, Engineers, and Landscape Surveyors choosing not to pay this fee will have no impact on your professional license. Joining the Lien Recovery Fund was a requirement for licensure as a professional from May 1995 to May 1996. You likely joined the Lien Recovery Fund during that period to avoid losing your professional license. Because of a change in 1996, remaining a member of the Lien Recovery Fund for these types of professionals is entirely voluntary and not required.
CONDOMINIUM UNITS ARE TYPICALLY NOT ELIGIBLE
Condominium units are typically not eligible if part of your structure contains more than a “multifamily dwelling up to two units.” Utah Code § 38-11-102(21). See also LKL Associates, Inc. v. Farley, 2004 UT 51 ¶ 8 (“condominium units … located in a building containing ten units, do not qualify for the protections of the Lien Restriction Act.”)
The Utah Residence Lien Recovery Fund is an alternate payment source for contractors, laborers or suppliers whose liens are voided because a homeowner qualifies for protection under the Residence Lien Restriction and Lien Recovery Fund Act.
In 1994, the Utah Legislature recognized a problem within the residential construction industry. A few contractors were taking money for construction but not paying subcontractors and suppliers. Therefore, homeowners had to pay the subcontractors and suppliers directly to prevent loss of the home due to lien foreclosure. In effect, the homeowner had to pay twice for the same product or service. To correct this inequity, the legislature passed the Utah Residence Lien Restriction and Lien Recovery Fund Act.
The legislature has not authorized any state agency to assist contractors with filing, enforcing, collecting, etc. on any type of lien. All lien-related activities are handled through the civil court. Therefore, no one in state government can provide advice on how to file or enforce a lien. Persons needing such assistance are encouraged to obtain a copy of the laws related to mechanics’ liens.
FAQs for Homeowner or Representing Attorneys
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To qualify for this protection the homeowner must do the following:
- Contract in writing with a licensed contractor, a contractor that is exempt from licensure under the Utah Construction Trades Licensing Act, a factory built housing retailer, or a real estate developer for the purchase of or construction on a single-family or duplex residence.
- Pay the contract price in full to the contractor, factory built housing retailer, or real estate developer, including any amendments to the contract.
- Occupy the residence 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.
When applying for a Certificate of Compliance you will need the following documents:
- A copy of the written contract between you and the original contractor, factory built housing retailer, or real developer for the construction on or purchase of your single family or duplex residence.
- Evidence that the person with whom you contracted is a real estate developer, who is a licensed contractor, or has a contract with a licensed contractor; a factory built housing retailer, or is not required to have a contractor’s license—if applicable.
- Evidence that you paid the contractor, factory built housing retailer, or real estate developer in full according to the terms of your contract and any amendments to the contract.
FAQs for Potential Fund Claimants
(contractor, supplier, etc.)
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- The homeowner must enter into a written contract with a licensed contractor, a contractor exempt from licensure, a factory built housing retailer or a real estate developer for construction on or the purchase of a single family or duplex residence.
- The homeowner must pay the original contractor, factory built housing retailer, or real estate developer in full according to the terms of the written contract and any amendments to the contract.
- The homeowner must occupy the residence as a primary or secondary residence within 180 days of the completion of construction. Alternatively, the homeowner's tenant or lessee must occupy the residence within 180 days of the completion of construction.
Second, the Act creates the Residence Lien Recovery Fund (“the Fund”).
- The Utah Construction Trades Licensing Act does not distinguish between residential and commercial contractors.
- Contractors licensed in classifications that regularly engage in residential construction may perform residential construction at any time.
- The legislature has determined that the burden of funding the Fund should be spread over as large a segment of the construction industry as possible to lessen the burden on the individual registrant.
- General contractors cause the vast majority of the problems the Act addresses. Accordingly, the legislature determined that this classification of contractor should be included with those responsible for funding the solution to the problem.
A registration only covers those qualified services provided on or after the date of registration. Therefore, any services provided by a registrant prior to the date that registrant became registered with the Fund cannot be paid by the Fund even if all other requirements for payment are met.
PROTECTION AGAINST LIENS AND CIVIL ACTION. Notice is hereby provided in accordance with Section 38-11-108 of the Utah Code that under Utah law an "owner" may be protected against liens being maintained against an "owneroccupied residence" and from other civil action being maintained to recover monies owed for "qualified services" performed or provided by suppliers and subcontractors as a part of this contract, if and only if the following conditions are satisfied:
- the owner entered into a written contract an original contractor, a factory built housing retailer, or a real estate developer;
- the original contractor was properly licensed or exempt from licensure under Title 58, Chapter 55, Utah Construction Trades Licensing Act at the time the contract was executed; and
- the owner paid in full the original contractor, factory built housing retailer, or real estate developer or their successors or assigns in accordance with the written contract and any written or oral amendments to the contract.
- An owner who has satisfied all of these conditions may perfect his protection from liens by applying for a Certificate of Compliance with the Division of Occupational and Professional Licensing by calling (801) 530-6029 and requesting to speak to the Lien Recovery Fund. (Utah Administrative Code R156-38a-108)
Failure to include this language in the contract constitutes unlawful conduct and is punishable by citation and fine.
PROTECTION AGAINST LIENS AND CIVIL ACTION. Notice is hereby provided in accordance with Section 38-11-108 of the Utah Code that under Utah law an "owner" may be protected against liens being maintained against an "owneroccupied residence" and from other civil action being maintained to recover monies owed for "qualified services" performed or provided by suppliers and subcontractors as a part of this contract, if and only if the following conditions are satisfied:
- the owner entered into a written contract an original contractor, a factory built housing retailer, or a real estate developer;
- the original contractor was properly licensed or exempt from licensure under Title 58, Chapter 55, Utah Construction Trades Licensing Act at the time the contract was executed; and
- the owner paid in full the original contractor, factory built housing retailer, or real estate developer or their successors or assigns in accordance with the written contract and any written or oral amendments to the contract.
- An owner who has satisfied all of these conditions may perfect his protection from liens by applying for a Certificate of Compliance with the Division of Occupational and Professional Licensing by calling (801) 530-6029 and requesting to speak to the Lien Recovery Fund. (Utah Administrative Code R156-38a-108)
Failure to include this language on the Notice of Lien may result in lien foreclosure being denied.
The claimant is also required to provide the homeowner with an application for a Certificate of Compliance the homeowner can use to have the Division adjudicate whether all the requirements of the Act have been met. Download the Certificate of Compliance Application or call (801) 530-6029.
I am a qualified beneficiary. How do I file a claim with the Lien Recovery Fund? keyboard_arrow_down
- File a civil action against the nonpaying party (required) and the homeowner (optional). The Division recommends qualified beneficiaries consult with competent legal counsel prior to filing this action. The lawsuit must be filed within the earlier of: (1) 180 days from the date the qualified beneficiary filed a lien; or (2) 270 days from the completion of the original contract.
- Provide the homeowner with the required the application for a Certificate of Compliance (see question No. 17).
- Obtain judgment against the nonpaying party.
- Attempt to collect on the judgment. The Act requires that, at a minimum, the claimant must issue a Motion and Order in Supplemental Proceedings and attempt to serve that Motion. If the Motion is served, the claimant must provide evidence that no assets were located as a result of the Supplemental Proceeding.
- Complete and submit the claim application. The application instructions list all documents that must be included with the application. If any documents are missing, processing of the claim will be delayed and the claim may be denied. Therefore, the Division recommends claimants carefully read through the entire application and assemble all documents before submitting the claim. Download the Laborer Claim Form or call (801) 530-6029.
Important Notes:
- If the nonpaying party has filed for bankruptcy, the claimant may not be able to complete some or all of these steps. In that case, claimants are advised to call (801)530-6029 for information on how to proceed.
- The Division must receive the claim application not more than one year from the date judgment is entered against the nonpaying party or the date the nonpaying party files for bankruptcy – if that bankruptcy prevents the claimant from completing one or more of the required steps. Failure to meet this deadline will result in the claim being denied.
- Filing an administrative or civil action to determine that you are owed wages. You must file either a wage claim assignment with the Employment Standards Bureau of the Antidiscrimination & Labor Division of the Labor Commission of Utah or a civil action in a court of competent jurisdiction against your employer to recover wages owed.
- Obtaining a final determination that wages are owed. You must obtain either (1) a final administrative order from the Labor Commission containing findings that you are an employee and that your employer failed to pay you for wages for your work performed on the site of an owner-occupied residence; or (2) a civil judgment against your employer finding that the employer failed to pay you for wages due for your work performed on the site of an owner-occupied residence.
- Completing and submitting the claim application. The application instructions list all documents that must be included with the application. If any documents are missing processing of the claim will be delayed and the claim may be denied. Therefore, the Division recommends claimant’s carefully read through the entire application and assemble all documents before submitting the claim. Download the Claim Form or call (801) 530-6029 for assistance.
Important Notes:
- If the nonpaying party has filed for bankruptcy, the claimant may not be able to complete some or all of these steps. In that case, claimants are advised to call (801) 530-6029 for information on how to proceed.
- The Division must receive the claim application not more than one year from the date you last provided services on the residence at issue in the claim. Failure to meet this deadline will result in the claim being denied.
- You entered into a contract to provide qualified services to the nonpaying party, which contract contains provisions allowing you to collect (a) court costs and attorney fees incurred in enforcing the contract; and (b) interest on the amount owed under the contract.
- You obtained a civil judgment containing an order for the recovery of costs, a sumcertain amount of attorney fees, and interest.
If your judgment does not contain such orders, the Fund cannot pay your costs and attorney fees but will still pay interest. If you are precluded from obtaining a judgment by the nonpaying party’s bankruptcy filing, the Division may be able to pay a limited amount of substantiated costs and fees.
- Obtain reimbursement for the claim payment from the nonpaying party through the courts;
- Obtain reimbursement from the nonpaying party for court costs and attorney fees incurred in the subrogation action;
- Impose up to a $5,000 per-residence fine upon the nonpaying party.
Additionally, once the Division pays a claim, the nonpaying party’s license is suspended for one year or until the nonpaying party is approved for reinstatement, whichever is later.
Contact Us
Chris Rogers – Fund Manager
Ann Chon – Fund Secretary
Email: annchon@utah.gov
Phone: 801-530-6029
Mail:
DOPL-LRF
PO Box 146741
Salt Lake City, Utah 84114-6741
Forms
- FOR HOMEOWNERS:
- Homeowner Application for Certificate of Compliance
- FOR CONTRACTORS/SUPPLIERS:
- Qualified Beneficiary Claim Form
- Fund Registration Form
- Laborer Claim Form
- Lien Foreclosure Cover Letter
Laws and Rules
- DOPL Licensing Act, 58-1 (05/08/2018)
- General Rule of the Division of Occupational and Professional Licensing, R156-1. (01/09/2020)
- Preconstruction and Construction Liens, 38-1a
- Utah Residence Lien Restriction and Lien Recovery Fund Act, 38-11 (09/09/2019)
- Utah Residence Lien Recovery Fund Administrative Rules, R156-38a (08/21/2018)
- State Construction Registry Rule R156-38b (09/09/2019)