Automatic Release of Lien When Notice of Release and Substitution of Alternate Security is Recorded

In 2001, a new provision was added to the Utah's mechanic’s lien law which allows an owner or original contractor to post a surety or cash bond in exchange for a release of the mechanic’s lien. Utah Code Ann. § 38-1-28.

The owner, original contractor, or a subcontractor can arrange for a surety or deposit a cash bond in the amount of 150% of the amount of the principal lien claim, if that amount is $25,000 or more, 175% if the amount claimed is between $15,000 and $25,000, and 200% if the amount claimed is less than $15,000. The release happens automatically when the owner, original contractor, or subcontractor files in the county recorder’s office a “Notice of Release of Lien and Substitution of Alternate Security.” The amount of any lien claim is set by the lien claimant himself at the time he files the notice of claim. Utah Code Ann. § 38-1-7(2)(a)(vi). The person or entity wishing to post the alternate security can simply look to the lien claim to determine the amount of the bond, and then post 150%, 175%, or 200% of that amount, depending on which percentage applies.

There remain may issues with the alternate security section’s somewhat cryptic treatment of the requirements and procedure to be followed for the Notice of Release to be effective to release the property from serving as security for the lien claimant’s debt.