Bulletin: UT2014002

Dear Associates:

This bulletin advises you of changes to the Utah Mechanic’s Lien Law. The new law goes into effect on May 13, 2014. This bulletin should be read in conjunction with other national and state specific bulletins relating to insuring construction loans. (See specifically MU2010008). Additionally, this bulletin amends bulletin UT2011001.

H.B. 42 made significant changes to the Utah Mechanic’s Lien Law. The withdrawal of a preliminary notice on the State Construction Registry (“SCR”) process was stricken from the statute. No longer can we go to a supplier or contractor and ask for a withdrawal. In its place is the ability to obtain priority for the insured trust deed lien before and after recordation of the trust deed. Here is the relevant language from the statute.

U.C.A. 38-1a-503 (2)(b) “A recorded mortgage or trust deed that secures a construction loan attaches immediately before the first preliminary notice filing for the construction project if each claimant that has a preliminary notice on file on the construction project before the mortgage or trust deed was recorded receives full payment for all construction work the claimant performed before  the mortgage or trust deed was recorded, regardless of whether the claimant receives full payment before or after the day on which the mortgage or trust deed is recorded.”

REQUIREMENTS:  Prior to the issuance of a policy insuring the lien of a construction deed of trust the agent must submit a Request for Approval to Issue Overlimits (Large) Policy or Extra Hazardous Coverage form and approval must be given by an underwriter and the following guidelines must be followed:

1)   On each transaction involving a construction loan the SCR must be searched to verify that no preliminary notice has been filed. Each agent must check the SCR at the time the commitment is issued and at the time the construction trust deed is being recorded. If no notice is found on the SCR, the construction trust deed may be recorded. If a preliminary notice is found on the SCR, recording may not occur unless the filer on the SCR has provided the agent with a lien waiver, which states the filer has been paid in full for all work performed and/or material supplied to the project up to the date of recording of the trust deed. (A form of the Conditional Lien Waiver and Unconditional Lien Waiver to be used are included with this bulletin).

2)   Each commitment relating to the insurance of a construction trust deed shall contain a requirement that the SCR must be searched prior to the recording of the construction trust deed.

3)   Following the recordation of the Construction Trust Deed a Notice of Construction Loan still must be filed on the SCR in order for the Trust Deed to have priority. As such, either the agent or the lender must file the notice on the SCR. You should obtain verification that the lender has made the filing or you should make the filing.

Pending Disbursement Clauses will continue to be part of the commitment and policy. (See MU2010008). Per MU2010008, a mechanic’s lien exception must be retained in the policy unless there is underwriter approval for deletion. Underwriter approval for each construction loan shall continue to be necessary.

If you have any questions relating to this or other bulletins, please contact a Stewart Title Guaranty Company underwriter.

For on-line viewing of this and other bulletins, please log onto www.vuwriter.com.

UTAH CONDITIONAL WAIVER AND RELEASE UPON PROGRESS PAYMENT

UTAH WAIVER AND RELEASE UPON FINAL PAYMENT