Utah court dismisses Wrongful Lien Act claims against Covenant Clearinghouse
A Utah County court dismissed with prejudice claims under Utah’s Wrongful Lien Act against Covenant Clearinghouse, LLC, the company said in a release.
A Utah County court dismissed with prejudice claims under Utah’s Wrongful Lien Act against Covenant Clearinghouse, LLC, after finding the plaintiff did not show the company lacked a plausible good-faith basis for recording property-related instruments, according to the company’s release.
According to the release, the case involved Covenant Clearinghouse’s recording of a Notice of Transfer Fee Covenant and related Notices of Rescission and Invalidity tied to property subject to a recorded Declaration of Covenants. The court found the plaintiff failed to establish that Covenant Clearinghouse lacked a plausible good-faith basis for the recordings and concluded the filings were supported by a plausible good-faith belief that they were authorized.
The source says the court also emphasized that recording a termination document does not, by itself, make a termination legally effective. Questions about enforceability, interpretation of termination provisions and the validity of recorded instruments should be resolved through the governing documents and applicable law, rather than through the act’s narrow, expedited procedure.
Matthew T. Kennedy, identified in the release as general counsel for Covenant Clearinghouse, said a document labeled a termination is not self-executing. He said recording such a document does not answer whether the declaration was actually terminated.
The company said it is based in Austin, Texas, and has administered assessment rights for more than a decade. The release says those rights are also called capital recovery fees or transfer fees and are connected with hundreds of billions of dollars in planned and existing commercial and residential real estate developments.
The release did not include a copy of the court order. It said the Fourth District Court for Utah County dismissed all claims with prejudice.
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