Utah Code Liens 38-8-3: Enforcement of Lien–Notice Requirements–Sale Procedure and Effect
1. An owner may enforce a lien described in Section 38-8-2 against an occupant if:
a. the occupant is in default for a continuous 30-day period; and
b. the owner provides written notice of the owner’s intent to enforce the lien, in accordance with the requirements of this section, to:
i. the occupant;
ii. each lien holder disclosed by the occupant under Subsection 38-8-2(3)(b);
iii. each person that has filed a valid financing statement with the Division of Corporations and Commercial Code; and
iv. each person identified as a lien holder in the records of the Motor Vehicle Division.
2. An owner shall provide the written notice described in Subsection (1)(b):
a. in person;
b. by certified mail, to the person’s last known address; or
c. subject to Subsection (3), by email, to the person’s last know email address.
3. If an owner sends a notice described in Subsection (2) by email and does not receive a response, return receipt, or delivery confirmation from the email address to which the notice was sent within three business days after the day on which the notice was sent, the owner shall deliver the notice in person or by certified mail to the person’s last known address.
4. A written notice described in Subsection (1)(b) shall include:
a. an itemized statement of the owner’s claim showing the sum due at the time of the notice and the date when the sum became due;
b. a brief description of the personal property subject to the lien that permits the person to identify the property, unless the property is locked, fastened, sealed, tied, or otherwise stored in a manner that prevents immediate identification of the property;
c. if permitted by the terms of the rental agreement, a notice that the occupant may not access the occupant’s personal property until the occupant complies with the requirements described in Subsection (9); (c)
d. the name, street address, and telephone number of the owner or the individual the occupant may contact to respond to the notification;
e. a demand for payment within a specified time not less than 15 days after the day on which the notice is delivered; and
f. a conspicuous statement that, unless the claim is paid within the time stated in the notice, the personal property will be advertised for sale and will be sold at a specified time and place.
5. A notice under this section shall be presumed delivered when it is deposited with the United States Postal Service and properly addressed with postage prepaid. \
6. After the expiration of the time given in the notice, the owner shall publish an advertisement of the sale of the personal property subject to the lien once in a newspaper of general circulation in the county where the self-service storage facility is located.
a. An advertisement described in Subsection (6) shall include:
i. the address of the self-service storage facility and the number, if any, of the space where the personal property is located;
ii. the name of the occupant; and
iii. the time, place, and manner of the sale, which shall take place not sooner than 15 days after the day on which the sale is advertised under Subsection (6)(a). (iii)
7. A sale of the personal property shall conform to the terms of the notice provided for in this section.
8. A sale of the personal property shall be held at the self-service storage facility, at the nearest suitable place to where the personal property is held or stored, or online.
9. Before a sale of personal property under this section, the occupant may pay the amount necessary to satisfy the lien and the reasonable expenses incurred under this section and thereby redeem the personal property; upon receipt of this payment, the owner shall return the personal property, and thereafter the owner shall have no liability to any person with respect to that personal property.
10. A purchaser in good faith of the personal property sold to satisfy a lien as provided for in this chapter takes the property free of any rights of persons against whom the lien was valid and free of any rights of a secured creditor, despite noncompliance by the owner with the requirements of this section.
11. In the event of a sale under this section, the owner may satisfy the lien for the proceeds of the sale, subject to the rights of any prior lien holder; the lien rights of the prior lien holder are automatically transferred to the proceeds of the sale; if the sale is made in good faith and is conducted in a reasonable manner, the owner shall not be subject to any surcharge for a deficiency in the amount of a prior secured lien, but shall hold the balance, if any, for delivery to the occupant, lien holder, or other person in interest; if the occupant, lien holder, or other person in interest does not claim the balance of the proceeds within one year of the date of sale, it shall become the property of the Utah state treasurer as unclaimed property with no further claim against the owner.
12. If the requirements of this chapter are not satisfied, if the sale of the personal property is not in conformity with the notice of sale, or if there is a willful violation of this chapter, nothing in this section affects the rights and liabilities of the owner, occupant, or any other person.
Creditors come in two basic types: secured and unsecured. Although the amount of the debt may be the same, the remedies available to the creditor are very different. Secured creditors have a claim against a specific asset, whereas unsecured creditors do not. Creditors can be unsecured or secured. An unsecured, or general, creditor has a general claim against a debtor this claim is not secured by any particular asset of the debtor. An unsecured creditor has the weakest claim, which may go unpaid in a bankruptcy proceeding. However, an unsecured creditor may become a secured creditor after a lawsuit and judgment. A secured creditor, who has an interest (referred to as a lien) on a particular asset, can use the court system to seize the asset and to satisfy the debt. This clearly presents a significant risk for the business owner.
Liens Enable Creditors to Assert Rights Over Property
Unless the debtor is prudent and has taken measures to safeguard his assets, there is a risk that the creditors can seize assets and take your wealth. In order to know if your assets are at risk, it is imperative that you have an understanding of the different types of liens you may encounter as a small business owner:
• Consensual
• Purchase-Money Security Liens
• Non-Purchase-Money Security Liens
• Statutory
• Mechanic’s Liens Tax Liens
• Judgment
Consensual Liens Are Voluntary
As the name implies, consensual liens are those to which you voluntarily consent, as a result of a loan or other advance of credit. The property purchased secures the buyer’s obligation to pay for the property. One common example is the residential mortgage: a home buyer consents to a bank taking a security interest in the home when a mortgage is obtained. Similarly, a security interest also is created when a car dealer arranges for financing for a car buyer.
There are two broad classes of consensual liens:
• Purchase-Money Security Interest Liens: Here, the creditor extends credit to the debtor specifically for the purchase of the property that secures the debt. Examples include a first mortgage on a home, a car loan, and situations in which the seller finances the purchase of property, such as furniture, through a credit agreement.
• Non-Purchase-Money Security Interest Liens: Here, the debtor puts up property he or she already owns as collateral for a loan. The loan proceeds are then used to pay expenses (or perhaps to buy other property). Examples include a second mortgage (or refinancing of a mortgage) on a home or a loan used to pay operating expenses with previously owned office equipment put up as collateral.
Both types of consensual liens are usually non-possessory. This means that the creditor does not take or retain possession of the property; rather, the debtor takes, or retains, possession of the property. However, it’s possible for either type of consensual lien to be possessory. In that case, the creditor takes possession of the collateral. A loan from a pawnbroker, for example, usually would create a possessory, non-purchase-money security interest lien in the collateral. While this seems very straightforward, the type of debt can have a large impact on the creditor’s rights if a debtor defaults. The rules vary from state to state, but characteristics of a debt are critical to understand if assets are to be protected. Issues include:
• Who is holding the property that secures the debt: the debtor or the creditor? In a car loan, the debtor has possession of the property. When a loan is obtained from a pawnshop, the creditor has possession of the property securing the loan.
• Was the debt incurred to purchase property or not? For example, a first mortgage loan is a purchase money loan since the proceeds were used to purchase a residence. In contrast, a refinancing loan is not a purchase money loan. The homeowner already owned the property.
• What is the nature of the property to which the lien is attached? This is often the essential inquiry when it comes to asset protection. The states, as well as the federal government, have a wide variety of laws relating to what assets are protected from creditors and how they are protected. The primary mechanism for protecting selected assets is a concept called exemptions. In essence, the law may declare that certain property simply cannot be seized by a creditor.
Statutory and Judgment Liens Arise by Operation of Law
In addition to consensual liens, there are many different types of liens that creditors can use to get at your assets to satisfy a debt. In certain circumstances, creditors obtain security interests by the operation of state (or federal) laws. These liens include:
• Mechanic’s Liens: This type of lien arises when a contractor or mechanic performs work on property and is not paid. Examples include a contractor who installs a furnace in a home, or an auto mechanic who performs repairs to a car. This lien is a security interest in the property. If the owner tries to sell the property, the debtor will have a secured interest in the portion of the proceeds needed to pay the debt. In addition, having a mechanic’s lien can delay or prevent the sale of real property until debt is satisfied and the lien released.
• Tax Liens. This type of lien is placed against property by the local, state or federal government, as authorized by statute, for delinquent taxes, including property, income and estate taxes.
Judgment Liens Arise As a Result of a Lawsuit
Of the three types of liens (consensual, statutory and judgment,) the judgment lien is the most dangerous form, but one which the informed business owner may be able to eliminate. A judicial lien is created when a court grants a creditor an interest in the debtor’s property, after a court judgment. Judgment liens can arise in a wide variety of circumstances basically, any incident that can land you in court can end up generating a judgment lien.
For example, if you are driving negligently and injure someone in an accident, the injured person may to sue for damages. To the extent that your insurance doesn’t cover the judgment, a judicial lien may be placed against your property to secure payment of the claim to the injured party. A plaintiff who obtains a monetary judgment is termed a “judgment creditor.” The defendant becomes a “judgment debtor.” The judgment in the lawsuit provides the basis for the lien. If the debt is not paid, the judgment creditor can then seek to enforce (or execute) the judgment. This can be accomplished by garnishing wages, seizing a bank account, or placing a lien against the debtor’s property. The lien is the first step by the judgment creditor in a process that will culminate in a sale of the attached property, to satisfy the judgment debt.
Any lien placed on the defendant’s assets as a result of a court judgment is known as a judgment lien. If a lien were placed on a home, the judgment creditor could then seek to foreclose on the property, in the same way a mortgage holder such as a bank could foreclose if it were not paid. In this section, the term “judgment lien” is used in its strictest sense: a lien attributed to a court judgment, where the court judgment itself is the basis for the lien.
An example would be a plaintiff who is awarded a monetary judgment against a defendant in a lawsuit based on negligence, and who then is granted an order of attachment against the debtor’s property. In contrast, this definition excludes a judgment based on a pre-existing lien (i.e., a prior consensual lien or statutory lien). Thus, for example, this definition would exclude a judgment in a mortgage foreclosure. This distinction is critically important in discerning what types of liens against exempt property can be eliminated.
Notice to Perform
In real estate, a notice to perform is a document that sets up a contract with detailed expectations for either the buyer or the seller. If the expectations are not met, the party that sent the notice can cancel the real estate deal. The notice to perform serves two purposes—it gives the first party the chance to tell the other that there is an issue, and the second a chance to fix it before the deal is canceled. A notice to perform is a real estate clause or contract that requires parties to act by a set date. In many instances, you must give the notice to perform before you can cancel a purchase contract. Either the buyer or the seller can issue a notice to perform. However, the two parties may approach the process with different goals. You aren’t required to send a notice to perform if a buyer or seller misses a deadline. A gentle reminder from your real estate agent might be appropriate, but it depends on your circumstances. A notice to perform is usually only used if one party wants to cancel a deal because their requests aren’t met.
Sellers might demand that buyers perform because they don’t want to drag out an escrow, only to find out the buyers were never going to close. In the case of a contingency release, the seller may be entitled to the buyer’s earnest money deposit if the buyer later cancels the transaction after releasing all contingencies.
Real estate deals can be full of contingencies. Some common ones are:
• A loan contingency so the seller can cancel the deal if the buyer does not secure a loan in time.\
• An appraisal contingency so the buyer can cancel if the home appraises for less than the price in the contract.
• An inspection contingency that allows the buyer to back out of the deal if the inspector finds major issues.
• The seller and buyer might need certain disclosures and reports.
• The buyer may want the house they own to sell before they complete the purchase of another.
Why Use a Notice to Buyer to Perform?
Buyers may not be aware of all the contractual agreements they’re making when they sign a purchase agreement. However, before a seller can cancel a contract due to the buyer’s failure to do any of these things, the seller must send the buyer a notice demanding that the buyer perform. Some common seller concerns are:
• The buyer hasn’t made an earnest money deposit.
• The seller might want to increase the earnest money deposit.
• The buyer needs to submit a loan preapproval or prequalification letter.
• The seller might want to see proof of funds to close escrow.
• The seller might want the buyer to sign and return disclosures and reports by a specific date.
• The seller wants the buyer to provide evidence that their current home is in escrow.
Free Initial Consultation with Lawyer
It’s not a matter of if, it’s a matter of when. Legal problems come to everyone. Whether it’s your son who gets in a car wreck, your uncle who loses his job and needs to file for bankruptcy, your sister’s brother who’s getting divorced, or a grandparent that passes away without a will -all of us have legal issues and questions that arise. So when you have a law question, call Ascent Law for your free consultation (801) 676-5506. We want to help you!
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506
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Free Initial Consultation with Lawyer
It’s not a matter of if, it’s a matter of when. Legal problems come to everyone. Whether it’s your son who gets in a car wreck, your uncle who loses his job and needs to file for bankruptcy, your sister’s brother who’s getting divorced, or a grandparent that passes away without a will -all of us have legal issues and questions that arise. So when you have a law question, call Ascent Law for your free consultation (801) 676-5506. We want to help you!
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506
Recent Posts
Divorce Lawyer and Family Law Attorneys
Ascent Law St. George Utah Office
Ascent Law Ogden Utah Office
