STATE CONSTRUCTION REGISTRY OF UTAH
SERVICE TO THE CITIZEN AWARD WINNER
he overall goal of the State Construction Registry is to increase visibility into the financial risks associated with specific construction projects; increasing transparency capacity to protect the appropriate parties, while simultaneously preserving the State’s Lien Recovery Fund. The State Construction Registry serves as an important tool to manage construction projects and liens within the State. In its most recent update new features were added to help make the tool more useful for today’s builders and property owners who use the online tool to help manage projects.
The State Construction Registry (SCR) is an online “bulletin board” of construction project information in Utah. Created by legislation, the State Construction Registry exists to provide a database of all construction projects in the state, protects property owners from unnecessary liens, helps construction project participants (especially subcontractors and suppliers) to be paid in a timely manner, and makes general contractors, property owners, banks, title companies, and other interested parties aware of all the subcontractors and suppliers on any given commercial or residential construction project in Utah.
The Utah Legislature created the State Construction Registry for two reasons: first, to provide more visibility to property (change all instances of homeowner to property) owners, lenders, and general contractors or any party who has lien rights on a particular construction project. Second, to reduce the drain on the Residential Lien Recovery Fund.
Prior to this change, notices were only mailed to owners, usually as a certified letter. In the old model, general contractors, banks and title companies do not have visibility into who is working on each construction job. All other states still use the certified letter method.
The mechanics lien laws across the country create an unfair problem in the construction industry where an owner may have to pay twice for the construction project or the sub contractor may not get paid at all when someone else fails to pay.
This inherent, systematic problem caused the state of Utah to create an official Lien Recovery Fund to help lessen the financial impact of this problem on property owners and sub-contractors. The State was acting as an insurance policy for lien holders by requiring all General Contractors to pay into this fund to help the whole construction industry in Utah. This fund didn’t solve the problem, it simply spread out the damage to more people.
The State Construction Registry website operates like a bulletin board, where anyone working on a job files a “preliminary notice”. This notice allows owners, general contractors and banks to make sure payments make it to the end of the contracting chain, thereby preventing liens.
The State Construction Registry application helps the construction industry first by reducing the need for a lien recovery fund, and secondly it reduces the cost of filing by eliminating the $11.00 expense of using registered mail and third property owners and their banks and title companies have the ability to manage payments all the way to sub contractors.
Since the program’s inception in 2005, the State Construction Registry has filed 27,934 notices of commencement by owner or general contractor, 221,931 notices of commencement by cities, and 617,555 preliminary notices. Totaling 867,420 filings. Since the implementation of the State Construction Registry, the number of claims has dropped per year. On average, there were 171 claims per year made against the fund from 2001-2005. Once implemented, claims have dropped to an average of 112 per year.
The Utah legislature and the construction industry did not want to modify the protection that lien laws offer. However, the State did want to allow owners to have more transparency regarding who is working on a given construction project. With the passage of House Bill 136 and the subsequent creation of the State Construction Registry, property owners now have the ability to know which subcontractors and suppliers have provided labor and material on their project and work directly with them to make sure they are paid.
The following information is now available online via the State Construction Registry:
Provides general contractors and property owners complete project knowledge and access to complete project participant information
Enables general contractors and property owners to protect themselves from unnecessary risk and ensure that all contracting parties receive payment
Provides subcontractors and suppliers a standard process for preserving lien rights and thus ensure timely payment for services rendered
The State Construction Registry significantly improves the original system while simultaneously providing more transparency for respective parties.
Time and Cost Savings
The cost avoidance for the construction industry is huge. From 2012-2015, there were 443,768 preliminary notices filed in the State Construction Registry. A certified letter costs $10.00 more than filing a preliminary notice. Because the construction industry used the online tool instead of certified mail, they avoided paying $4,437,680.
General contractors, sub-contractors, and suppliers do not have to use the State Construction Registry; however, failure to file notices through the State Construction Registry automatically denies project participants the right to lien a property. In other words, if contractors and suppliers want to eventually lien the property to receive payment, they must file notices through the State Construction Registry.
The Preliminary Notices filed by subcontractors and suppliers has grown from 172 in the first month to almost 18,000 notices filed on average each month. Increased adoption indicates more subcontractors and suppliers are able to be paid before the job is completed. Simply stated, as more construction projects get added to the State Construction Registry and more subcontractors/suppliers use the system to make their presence known, the number of potential liens filed against unsuspecting property owners drops which ultimately safe-guards industry.