In Utah, as in many other states, people who build or remodel a house are at the mercy of the contractor to pay his or her suppliers.
Many people have happily moved into their new house and dutifully paid their bills only to discover something called a mechanics' lien slapped against their property.Using such a lien, anyone the contractor neglects to pay can force the homeowner, not the contractor, to pay again. If the homeowner refuses to pay, he or she may lose the house.
The mechanics' lien law, derided as unfair by virtually all homeowners who fall into its trap, dates back to the early years of this century when suppliers wanted some assurance they either would be paid or rewarded with a repossessed house.
If the same convoluted logic were applied to other products, General Motors could repossess a new car if the dealer neglected to pay for it, regardless of whether the car buyer paid. Any appliance manufacturer could do the same if the local department store didn't pay..
This year, state lawmakers finally will consider changing the law to give homeowners a fighting chance. Senate Bill 87, sponsored by Sen. Scott Howell, D-Salt Lake, would set up a recovery fund for subcontractors and suppliers, into which each licensed contractor in the state would pay an as-yet unspecified fee.
Homeowners would escape having to pay twice if they signed a written contract with a licensed contractor for all the work performed, paid the full amount on time and obtained the necessary building permits. Payments from the fund would be administered by a board comprising two contractors, two suppliers and three members of the general public. Any contractor whose actions require a payment from the fund would be forced either to replenish the fund or forfeit his or her license.
Builders may oppose the bill because they feel the fee, expected to be about $200 per year, would be excessive and the fund would amount to little more than an insurance policy for homeowners.
But how fair is it for contractors to have a free insurance policy against having to meet their obligations? Builders should happily support the law because it would decrease the number of jobs obtained by unlicensed contractors - the nemesis of hard-working, reputable contractors.
And if the fee were set at $200, or even twice that, it would hardly be excessive. If a builder constructed only 10 houses per year, the fee would amount to only $20 per house.
Naturally, such a law would be effective only if homeowners and buyers knew about it. Howell hopes the board and natural market forces will help educate the public. Once the law is in place, lenders likely will require that its terms be followed.
The bill also would clearly define the length of time a supplier has in which to file a claim against the fund - setting the deadline at 90 days after the work is finished. Current law is, at best, ambiguous. After that, the supplier would have six months to obtain a court judgment, down from the current year.
All these changes likely would make it easier for title companies to offer and actively market insurance riders against mechanics' liens, making it less likely the recovery fund ever will be used.
Finally, homeowners would have the advantage against a liability that has provided many with one of the most unpleasant and costly surprises of their lives. The proposed new law makes a lot of sense.