Interpreting Utah’s former mechanic’s lien statute, the Utah Court of Appeals has held that a contractor that contracted with and provided construction services for a developer could not maintain a valid mechanic’s lien on property owned by a third-party landowner. In Reeve & Associates, Inc. v. Tanner, 2015 UT App 166 (2015), the owners of real property contracted to sell their land to a developer with the plan to create a residential subdivision. The developer, in turn, hired a contractor to take the actions necessary to receive county approval. While the contractor worked on the project, the developer encountered financing problems and did not pay the contractor. The contractor continued to work on the project, however, hoping that the deal would close. But the developer’s financiers backed out and the land sale fell through. The contractor subsequently filed mechanics’ liens on the project property and sought payment from the landowners in a lien foreclosure lawsuit.

After a bench trial, the district court ruled that the contractor’s liens were invalid because the contractor performed services for the developer only, who was not an agent of the landowner. The Utah Court of Appeals upheld the district court’s ruling. Citing Utah’s former mechanic’s lien statute, Utah Code Ann. § 38-1-3 (now found at Utah Code Ann. § 38-1a-301), the appellate court reminded the contractor of the statutory language that only those who have performed qualifying work “at the instance of the owner or any other person acting by his authority as agent, contractor, or otherwise” could maintain a lien. The court disagreed with the contractor’s argument that the phrase “or otherwise” did not require the developer to be an express agent of the landowner and ruled that “under a plain reading of the statute, anyone falling into the category of ‘or otherwise … must still satisfy the requirement of acting by [the owner’s] authority.’” The court further found that the contractor could not identify any evidence indicating that the developer was an agent of the landowner. The court noted that subdivision applications listed the “owners” as the developer and the contractor. Moreover, the developer had to grant permission for the contractor to communicate with the landowners and the contractor had to seek the developer’s approval to undertake any modifications requested by the landowner. The court found that these facts supported the district court’s finding that the landowners had not authorized the contractor’s work. To add to the contractor’s injury, the court further ruled that because the landowners prevailed in this lien foreclosure action, the contractor was required to pay the landowners’ attorneys’ fees.

The takeaway from this case and others like it is that if a contractor wishes to maintain a valid mechanic’s lien, it must ensure that any work performed on a project property is authorized by the actual owner of the property. Utah’s current lien statute has removed the language that the work must be “at the instance of the owner or any other person acting by his authority as agent, contractor, or otherwise.” Nevertheless, the legislative history associated with the current statute suggests that the legislature fully intended that landowners be privy to and authorize any work on their property before a lien would attach to the landowner’s property. Simply put, any construction contract must be made with the owner of land or the owner must ratify any construction work for a lien to successfully attach. This authorization may be vague when a contractor is dealing with a developer who does not own title to the project property. As such, contractors would do well to ensure that the construction work is authorized by the landowner before performing work on the property if they wish to maintain a valid lien in the event the developer does not pay.