Magazine article Business Credit

A Creditor's Guide to Utah's State Construction Registry

Magazine article Business Credit

A Creditor's Guide to Utah's State Construction Registry

Article excerpt

It is becoming an all too common situation on Utah construction projects where contractors and subcontractors become insolvent without paying downstream subcontractors and suppliers for their labor, services, materials or equipment. In cases of insolvency, a contract claim against the debtor may be worthless. In these situations, subcontractors and suppliers may need to pursue different sources for payment, such as mechanic's lien and payment bond claims.

Utah, like many other states, requires that certain notice be given as a condition to making mechanic's lien and payment bond claims since such claims will likely result in an owner or contractor paying twice. In Utah, notice is given through the State Construction Registry (SCR). The SCR is an online "bulletin board" (www.scr.utah. gov) designed to keep owners informed of all subcontractors and suppliers on their projects. Through the SCR, a "list" of all subcontractors and suppliers for the project is started by the filing of a Notice of Commencement. Subcontractors and suppliers can then add their names to this list by filing a Preliminary Notice. By being informed of those participating on their projects, owners and contractors can then take action to make sure the subcontractors and suppliers on the list are paid.

Subcontractors and suppliers named on the list but not paid can pursue mechanic's lien and payment bond claims. Those not on the list are barred from making such claims. Thus, it is important for subcontractors and suppliers to get their names on the project's list by filing a Preliminary Notice on the SCR.

At the conclusion of the project, the owner can file a Notice of Completion on the SCR. The Notice of Completion serves to notify subcontractors and suppliers that the project is complete. As explained below, the Notice of Completion also shortens the time period for filing Preliminary Notices and mechanic's liens. Subcontractors and suppliers should therefore monitor the SCR for Notices of Completion.

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Notice of Commencement

For the Preliminary Notice requirement to be in effect on a project and the list of subcontractors and suppliers to be started, a Notice of Commencement must be timely filed. Where a building permit has been issued on a construction project, the local government entity issuing the permit must file a Notice of Commencement with the SCR no later than 15 days after the building permit is issued. However, the original contractor or owner should verify on the SCR that the local authority has filed the Notice of Commencement. An original contractor is defined as one having a contract with the owner of the project, such as a general contractor. Furthermore, the original contractor, owner or owner-builder may file a Notice of Commencement no later than 15 days after either the building permit is issued or the start of physical construction work on the project.

The Notice of Commencement must include: (1) the owner name and address; (2) the original contractor name and address; (3) the payment bond surety name and address or a statement that a payment bond was not required; and (4) the project address, if it reasonably identifies the project, or the name and general description of the location of the project if the address does not reasonably identify the project. The Notice of Commencement may include: (1) a general description of the project; and (2) the lot or parcel number and any subdivision, development or other project name of the property if the property is subject to mechanic's liens.

Preliminary Notice

Except for a person who has a contract with an owner or owner-builder or a laborer compensated with wages, a Preliminary Notice is required from those potentially making mechanic's lien and payment bond claims on construction projects. Failure to file a Preliminary Notice when required is a waiver of the right to file a mechanic's lien or payment bond claim on the project. …

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