The Utah Supreme Court recently clarified that the only permissible amounts to claim under Utah’s mechanic lien statutes are those “equivalent to the value of the services rendered, labor performed, or materials or equipment furnished or rented.” Not included in amounts that a party may claim as part of the mechanic’s lien, and thus also may not be included towards calculating the amount necessary to bond around a mechanic’s lien, are the attorneys’ fees and costs the liening party may incur along the way.

In 2 Ton Plumbing, LLC v. Thorgaard, 2015 UT 29, decided earlier this year, the Utah Supreme Court considered whether multiple amendments to a lien, adding attorneys’ fees that were incurred during foreclosure of the lien, continually modified the amount necessary to bond around the lien. In this case, the contractor/liening party originally recorded a mechanic’s lien for plumbing, materials and installation in the amount of $7,470.72. Subsequent to the lien recording, the subject property was conveyed and encumbered multiple times. Subsequently, the contractor filed suit and thereafter, recorded an amended notice of mechanic’s lien raising the amount to $20,983.42. That amount included claims for interest, late fees and attorneys’ fees that had been incurred subsequent to recording the original lien. To clear title, the lender for the last purchaser of the property filed a statutory notice of release of lien and substitute alternate security with a cash deposit of $14,942, which purportedly satisfied the statute’s requirement of bonding for 200 percent of the original lien amount. Unphased by the notice of release of lien, the contractor filed yet another amended mechanic’s lien raising the amount to $38,714.98, again adding fees and costs incurred in the litigation. At the same time, the contractor argued that the cash bond was inadequate, because it was only a fraction of the current lien amount of over $38,000.

Ultimately, the latest purchaser stipulated that the value of the original services, labor and materials was $7,147.41. The parties then submitted their disputed claims for attorneys’ fees and contested the issue whether the notice of lien release and bond amount were valid. The trial court entered judgment for the stipulated value, $1,300 in costs, $4,600 in interest, and nearly $45,000 in attorneys’ fees. The trial court also ruled that the bond amount was inadequate because of the later lien amendments.

On appeal, the Utah Supreme Court reversed the trial court and held that the Utah code does not allow a lien claimant to include attorneys’ fees or costs incurred in prosecuting the lien claim in the “amount of the lien claim” set forth in the notice of lien. It stated that an award of attorneys’ fees is a conditional award, depending upon the outcome of the action to enforce the lien. If the contractor’s argument were the law, the Utah Supreme Court rightly noted that “a party seeking to post alternate security would be chasing a moving target, because as the lien amount increased, the amount required for alternate security would correspondingly increase.” The Utah Supreme Court clarified, however, that once a judgment had been rendered enforcing a mechanic’s lien, which judgment would be permitted to include a reasonable attorney’s fee in favor of the successful party, that total amount would and could constitute a valid judgment lien against the property, and in that instance the attorneys’ fees would be part of the encumbrance. Also helpful to parties seeking to bond around liens, the Utah Supreme Court clarified that even if a party is served midway through a lien foreclosure action, as here, the amount that that party need pay to bond around and provide alternate security for the subject lien is limited to the value of the services, materials and improvement, exclusive of any attorneys’ fees that may have been incurred during the lien foreclosure process. Under the statute, alternate security must be 150 percent of the amount claimed in the notice of lien if the claim exceeds $25,000, 175 percent of the lien claim if the amount is between $15,000 and $25,000, and 200 percent of the lien claim if it is less than $15,000. These clarifications are welcome, given the previous uncertainty surrounding Utah’s lien laws.