Mechanics’ Lien

There are dozens of articles from attorneys across Colorado that will give you the basic requirements related to defending or asserting a mechanics’ lien.  This article is different in that we will give you some strategies in how to get paid if you are a contractor/subcontract/supplier, or how to dispute and defend against a lien on your property if you are the property’s owner.   Aaron Barrick and Michael Hupf at Folkestad Fazekas Barrick Patoile, P.C., routinely represent both contractors in filing and prosecuting mechanics’ liens and property owners in Colorado in responding and defending mechanics’ lien.

In construction projects, payment disputes often arise.  Mechanics’ liens are filed and recorded against property where the work was performed and are a valuable tool for construction professionals and material suppliers to obtain payment.  In the inverse, mechanics’ liens must be reviewed and evaluated by the property owner and immediately addressed in order to protect the property.  The following is a summary of the requirements and some tips for what to consider if you are faced with a mechanics’ lien issue.

The provisions of the Colorado statutes that permit the filing of mechanics’ liens and materialmen’s liens can be found in Colorado Revised Statutes, §38-22-101 through §38-22-133.   The statutory requirements for mechanics’ liens are strictly enforced and so, it is critical that the requirements are followed.  Here is a summary of the steps that must be followed:

1. Notice of Intent to File a Mechanics’ Lien: The first step in filing a mechanics’ lien is notifying the owner(s) of the property and the principal contractor that you intend to file a mechanic’s lien (“Notice”).  The Notice must be delivered by personal service or by registered or certified mail, with return receipt requested.  A contractor must mail/serve this Notice at least ten (10) days before recording the mechanics’ lien with the Office of Clerk and Recorder in the county where the property is located.

Tip for a property owner: If the contractor fails to serve the notice of intent or fails to wait ten days before recording, the lien may be declared void.  Moore Elec. Co. v. Ambassador Builder Corp., 653 P.2d 90, 93 (Colo. App. 1982).

Tip for a contractor: If the Notice of Intent is discovered to be defective, you can start the process over by correcting the information and serving a new Notice of Intent.  It is critical that you still comply with the timing requirements discussed below!

2. Recording the Lien: Ten days after the contractor has mailed or personally served the Notice, it can record the mechanics’ lien with the Office of Clerk and Recorder where the property is located (the “Lien Statement”).  The Lien Statement must be signed and sworn to by the claimant to the best of the claimant’s knowledge, information and belief.  The Lien Statement must include: (a) the name of the lien claimant; (b) the owner or reputed owner if known, if unknown a statement stating such; (c) a description of the lien claimant’s role (contractor, subcontractor, etc.); (d) the name of the principal contractor, if known, if unknown a statement stating such; (e) the amount due and owing the claimant (be aware, if a Lien Statement is filed for a larger sum than is actually owed, the entire lien is invalid).

The Lien Statement must be recorded along with affidavits of service of the Notice and Lien Statement.  Generally, you must record the Lien Statement within 4 months of ending your work (or delivering your materials).  However, day laborers who only supply labor to the job site have a 2-month deadline to record the Lien Statement.

Tip for a property owner: If you dispute the amounts that are claimed to be due because of the quality of the work, you should immediately explain your position to the contractor (in writing) and demand that such work be repaired/fixed in accordance with the contract’s specifications.  Ideally, you would have previously advised the contractor of these issues, but better late than never!

 Tip for a contractor:  The time to file a lien may be extended if the claimant files a Notice of Extension of Time to File Lien with the Clerk and recorded in the county where the property is located. This Notice must include: (1) the legal description and/or address of the property; (2) the name of the person with whom the lien claimant has contracted; and (3) the lien claimant’s name, address, and telephone number. Upon filing this notice, the claimants’ deadline to file a Lien Statement will be extended to 4 months after completion of the structure/improvements or 6 months after the date the Notice was filed, whichever occurs first. The Notice automatically terminates 6 months after filing.

3. File a Lien Foreclosure Action: Your next step is filing a court action (a Complaint) to “foreclose” on the lien.  A mechanic’s lien claimant must bring a foreclosure action within six (6) months after one of three dates, whichever occurs last: (1) the date of the last work performed by the contractor; (2) the date of the last materials furnished by the supplier; or (3) the date of completion of the building or improvement.  “Completion of the construction project” usually means the date on which the Certificate of Occupancy was issued, or the date when all work was completed.

All parties must be aware of the expiration of any duly filed mechanics’ lien.  When the project is still ongoing, the lien may be extended if, within 30 days after each anniversary of filing the lien, the claimant files a statement that the improvements are not yet completed. The claimant must also file a lis pendens when filing suit, and always no later than six months after the last labor or materials are furnished, or the project is complete. C.R.S. §§ 38-22-109, 38-22-110

Tip for a property owner: Get lien waivers!  Property owners should include a requirement in their contract that lien waivers are included with each payment application submitted.  Then, property owners need to enforce this requirement and ensure that lien waivers are regularly provided for the work that has been performed to date.

Tip for a contractor: You must understand the priority of liens including deeds of trusts, judgment liens, tax liens, assessment liens, and mechanics liens. In cases where multiple mechanics’ liens are filed against the same property by a different contractors, subcontractors and suppliers, the priority of those liens can determine the order in which they are satisfied from the proceeds of a foreclosure sale. If there is not sufficient equity in the property to cover the lien amount, then it may be advisable to forego a foreclosure action.

Conclusion

Mechanics’ liens play a vital role in protecting the interests of contractors, subcontractors, and suppliers in Colorado’s construction industry. But filing a mechanics’ lien for an excessive amount can result in forfeiture of the entire claim.  Additionally, one who files an exaggerated mechanics’ lien can be made to pay attorneys’ fees and costs to the aggrieved party.  Byerly v. Bank of Colorado, 411 P.3d 732, 740 (Colo. App. 2013); C.R.S. § 38-22-128.  It is often beneficial to seek the guidance of an experienced construction attorney like the attorneys at Folkestad Fazekas Barrick Patoile, P.C. to assist with the mechanics’ lien process.