The three failure modes the statute names

Each limb of subsection (12)(b)(ii) describes a covenant that was already dead when someone re-recorded a notice for it.

Foreclosure priority. A purchase-money trust deed recorded ahead of the covenant, once foreclosed, takes the covenant with it. A notice recorded after that foreclosure is reviving something the sale extinguished.

The missing predicate notice. Section 57-1-46 conditions a transfer-fee covenant's enforceability on a notice having been recorded in the first place. A later notice cannot supply a predicate that never existed.

The recorded termination. Where a rescission, release or waiver is already on record, a subsequent notice contradicts the record it sits in.

None of the three is a new substantive rule about when a covenant is enforceable. What is new is the consequence: the remedy moves from a quiet-title action about the covenant to a wrongful-lien proceeding about the document.

What the county recorder is not required to do

The bill added a disclaimer in the fee statute itself, at § 57-1-46(5)(b), with parallel language at (7)(c)(ii):

“A county recorder is not required to determine whether a notice of transfer fee covenant is a wrongful lien for purposes of this Subsection (5).”

Utah recorders index documents; they do not adjudicate them. The clause makes explicit that a notice being recordable says nothing about whether it is valid — the challenge happens afterwards, in a proceeding, not at the counter.

What the bill did not do

Earlier drafts reportedly barred an association from filing any lien at all until it registered with the Department of Commerce. That provision is not in the enacted text, which reaches transfer-fee and reinvestment-fee covenant notices and nothing wider.

The registration-and-lien question is nonetheless already settled elsewhere in Utah law, and more harshly. Section 57-8a-105(6)(a) provides that during any period of noncompliance with the registration requirement “a lien may not arise under Section 57-8a-301” and the association “may not enforce an existing lien that arose under Section 57-8a-301.” Subsection (6)(f) goes further: a lien that arose before a conveyance to an independent third party during a noncompliance period “is extinguished when the conveyance…becomes final.”² S.B. 196 left that machinery alone because it was already there.

How it sits against the assessment lien

Nothing in S.B. 196 touches the ordinary assessment lien. That instrument arises automatically on recording of the declaration — § 57-8a-301(1)(b): “The recording of a declaration constitutes record notice and perfection of a lien described in Subsection (1)(a).” Its priority is set at (4), behind anything recorded before the declaration, behind a first or second mortgage or trust deed recorded before the association's notice of lien, and behind tax liens. Our Utah collections and liens page sets out the full structure, including the 180-day delinquency precondition and the bar on nonjudicial foreclosure of a lien that includes a fine.

What to watch next

H.B. 306 of the same session capped reinvestment fees recorded on or after May 6, 2026 but left older covenants at their recorded rate.³ S.B. 196 is the other half of that picture: the older covenants the cap does not reach are the ones most likely to carry a defective notice, and this is the statute that addresses them one document at a time.