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SALT LAKE CITY — A safety net for homeowners who’ve had their homes slapped with a construction lien because their contractor didn’t pay a supplier is going away. This week, I reported on Kaitlin and Tyler Thomas’ situation. They hired a roofing company to replace the roof on their Lehi home and paid for it in full. But a company that supplied materials for the job said it had not been paid by the roofing company. So, it placed a lien on the Thomas home. “I do feel like we are in the middle of two companies' dispute and we shouldn’t have to be,” Kaitlin Thomas told me. “We paid what we needed to, and we shouldn't be involved in this.” The dispute between roofer and supplier was eventually settled, and the lien was lifted. But before that, the Thomases and other homeowners stuck in the middle were told by the roofer they should seek relief through Utah's Residence Lien Recovery Fund.
Lien recovery fund
The fund is a safety net for a homeowner with a written contract who has paid a licensed contractor as agreed. It’ll pay subcontractors, suppliers or workers on the job if the contractor has failed to pay them. The money for the Residence Lien Recovery Fund comes from a fee that contractors must pay when they get their license. At least, that’s how it used to work. For close to a decade now, the legislature has told the Division of Professional Licensing, or the DOPL, to stop collecting those fees. “We’re now at the point where it has effectively wound down to zero,” said Mark Steinagel, the division’s director. “The lien recovery fund is out of money?” I asked Steinagel. “The lien recovery fund is – yes,” he confirmed. Steinagel said that just because the fund is broke, that doesn't mean homeowners lose protection.
Certificate of compliance
“The lien recovery fund was always based on kind of two parts,” he said. Part one was the money. Part two is something called a Certificate of Compliance. That’s basically a note from DOPL that states the homeowner did their part. Now the lien needs to be removed within 15 days. That does not mean a jilted supplier or subcontractor gets paid. “The subcontractors and suppliers who did the work and whom the homeowner paid for, and some contractor didn't pay them, that is a problem,” Steinagel said. A problem that will no longer be underwritten by good contractors or the state. “They (subcontractors and suppliers) need to go against the party that didn't pay them rather than the homeowner who paid,” said Steinagel. I asked him how this will change construction in Utah. “I don’t see it significantly changing,” he answered. Some stakeholders have raised concerns that not having money in the Residence Lien Recovery Fund could slow down construction as subcontractors or suppliers become less likely to take a risk without that safety net. But Steinagel is among those who argue putting an end to the money part of the fund makes sense. “The costs of running the fund were higher than the claims we were paying, and that's not a good government program,” he said. What this means for homeowners hasn't changed. If you follow the rules — pay your bills, hire a licensed contractor and have a written contract — you still have legal protection against a construction lien. But if you're someone who works on homes or if you’re a supplier, your financial protections have gone down.
