1. (1) A contractor that pays a material supplier, a contractor, or a subcontractor with which the contractor maintains a running account, holds multiple contracts, or owes an outstanding debt shall:

   1. (a) clearly designate the contract for which the payment is made; and
   2. (b) identify the specific items of account to which the payment applies.

2. (2) A subcontractor or material supplier that receives a payment for materials or labor shall require the person paying to:

   1. (a) clearly designate the contract for which the payment is made; and
   2. (b) identify the specific items of account to which the payment applies.

3. (3) In an action to enforce a lien for materials provided or labor performed by a subcontractor or material supplier, the owner may assert a defense to the lien if:

   1. (a) the owner paid the contractor for the materials and the contractor designated the payment in accordance with Subsection (1);
   2. (b) the contractor transferred the payment to the subcontractor or material supplier; and
   3. (c) the subcontractor or material supplier failed to require a designation of the account and the specific items of account when receiving the payment.

Enacted by Chapter 42, 2026 General Session