Lien Priority Over Permanent Financing

In 1993, the Utah Court of Appeals discussed the issue of what effect an unperfected mechanic’s lien had against persons who filed liens on the property after commencement of the work which would ultimately lead to the perfecting of a mechanic’s lien.

In Richards v. Security Pacific National Bank, 849 P.2d 606 (Utah Ct. App. 1993), the court of appeals was faced with a case where a painting contractor had commenced work on a property, but was not yet finished with the work. Before finishing, a financing institution closed a loan refinancing the property owner’s debt on the property. The trust deed securing the loan was assigned ultimately to Security Pacific. Richards eventually filed suit against Security Pacific and others, claiming that his mechanic’s lien was superior to the trust deed since mechanic’s liens “relate back” to the commencement of the work leading to the lien. See Utah Code Annotated §38-1-5 (1988). The Utah Court of Appeals ruled that the presence of building materials upon the land or other visible evidence of work performed provided notice to any interested party that work has commenced. That notice, said the court, is sufficient to preclude the subsequent lender, in this case Security Pacific, from gaining priority for its lien. Richards 849 P.2d 606. Thus, we can conclude from this case that the lien will actually exist, at least equitably, beginning when the work begins, and that the lien lapses if not perfected within the time provided by statute.