Utah general contractors often work with construction companies and other entities as a part of a large construction project. Depending on the type of work involved, you may qualify to place a mechanic’s lien against the home to insure payment. However, there are instances where the subcontractors aren’t paid and they can’t pursue the homeowners for compensation. When this happens, lien recovery assistance is available.

The state of Utah understands that there are sometimes two victims in these situations. The homeowner signed a contract with a construction corporation, real estate developer or a retailer of factory built housing. When the work was complete, the homeowner paid the main contractor; however, that contractor didn’t pay the subcontractors or suppliers for the job.

Prior to 1994, the homeowner was responsible for making sure subcontractors and suppliers were paid, even if the paid the original contractor. Utah understood that it was unfair to expect the homeowners to pay for the same work twice, however, the subcontractors also deserved to be compensated for their labor. This is why in 1994 they created the Residence Lien Restriction and Lien Recovery Act. They also created the Residence Lien Recovery Fund.

According to the Residence Lien Restriction and Lien Recovery Act, a subcontractor can’t maintain a mechanic’s lien or file a lawsuit against a homeowner in civil court if the homeowner entered into a valid contract, paid the original contractor, and the home was occupied within six months after work was completed.

The home had to be occupied by either the homeowner, or a renter or lessee to qualify for lien restriction. If the homeowner sold the home during that time and the new owner occupied the home within this timeframe, then the original homeowner didn’t qualify for a lien restriction.
If the homeowner meets these qualifications, then how do Utah general contractors make sure they are compensated for the project if the original contractor doesn’t pay them? One option is the Residence Lien Recovery Fund.

The Residence Lien Recovery Fund was created in 1994 as an alternative way for subcontractors to receive payment for a construction project if the original contractor denied them payment and the homeowner qualified for lien restriction. Between 1995 and 1996, Utah required licensed contractors to participate in the Fund as a condition of maintaining and renewing a license. That ended in 1996, however, and now participation is voluntary.

For more information on the Residence Lien Recovery Fund, visit http://www.dopl.utah.gov/programs/rlrf/index.html. For more information on Utah’s Mechanics Lien Law, you can download more information at http://le.utah.gov/~code/TITLE38/38_01.htm.

If you are looking to apply for a Utah general contractor’s license and need to learn more information about business law for the exam, UTCLC can help. Go to our FAQ page for more information.