Perhaps you’re a contractor in Colorado who has completed some work at a client’s home, but you haven’t been paid for your services. Or maybe you’ve hired a contractor to make repairs at your home, but the repairs were either not made according to building codes or they were left unfinished. Or perhaps you hired a contractor and it failed to pay its subcontractors, who are now looking to you, the property owner, for payment. Whatever the situation, it’s important to understand what mechanic’s liens are and how they operate in Colorado.
A mechanic’s lien is a method created by statute that permits a person who has conveyed labor, materials or services to secure an interest in another’s property to encourage and enforce payment. Mechanic’s liens are designed to assist contractors in getting paid for their efforts. Essentially, the purpose of mechanic’s liens is to benefit and protect those who supply labor, materials or services that enhance the value or condition of another’s property.
Mechanic’s liens are much more common in Colorado than you might realize, and understanding how to properly file or challenge a mechanic’s lien can be to your advantage. They are significant because they allow someone to make a claim against property when they have not been paid for their services. If done correctly, the property can be sold, and the person paid from that sale the amount they are owed. Mechanic’s liens can also be detrimental if filed against your property because they can interfere with your ability to sell the property or to use it as collateral for a loan. Determining whether or not a lien is valid helps to ensure that your interests are protected regardless of whether you are filing or defending a lien.
Colorado’s Procedures & Deadlines for Filing Mechanic’s Liens
In Colorado, mechanic’s liens are governed by a series of statutes, C.R.S. § 38-22-101 et seq., that outline certain conditions and deadlines that must be met in order for the lien to be valid. These specific conditions and time-limited deadlines are not optional, and if not followed correctly, they can result in the lien being unenforceable.
First, it is important to note that with certain, limited exceptions, mechanic’s liens in Colorado generally must be filed with the county clerk and recorder in the county where the property is located within four months after the last labor was performed or materials were furnished by the filing party.
Essentially, this means that a person usually has four months from the date they either stopped working on a job or completed their work on a job to file the lien. However, in situations where the contractor only performs labor, and does not supply laborers or materials, the mechanic’s lien must be filed within two months after completion of the project.
The process of actually filing a mechanic’s lien with the clerk and recorder is generally as straightforward as delivering certain documents, as discussed below, to the clerk and recorder’s office.
When filing a mechanic’s lien in Colorado, a statement containing the following information is required to be submitted to the Clerk and Recorder’s Office of the appropriate county:
- The name of the owner of the property against which the lien is being filed (or, if unknown, a statement explaining the information is unknown);
- The name of the person claiming the lien, the name of the person who furnished the laborers or materials or performed the labor for which the lien is claimed, and the name of the contractor when the lien is claimed by a subcontractor (or, if unknown, a statement explaining the information is unknown);
- A description of the property against which the lien is being filed; and
- A statement of the amount due or owed.
The lien statement also must be signed and sworn to by the person filing the lien to the best of their knowledge, information, and belief.
Importance of Accuracy When Filing Mechanic’s Liens
It is important when filing a mechanic’s lien in Colorado to ensure that the amount claimed is accurate. Otherwise, the filing party may forfeit all of their rights to the lien for any amount and be responsible for paying the costs and attorney fees for the person against who the lien was filed. This means, for example, that if a contractor files a mechanic’s lien in Colorado against a property owner without a “reasonable possibility” that the amount claimed is actually due, and that contractor knew that the lien amount was excessive, the contractor could lose the right to claim the lien amount and also be responsible for paying the property owner’s attorney fees and costs.
Therefore, caution should be exercised when calculating the amount due or owed (i.e., the lien amount) and careful math applied to confirm accuracy. Supporting documentation such as contract amounts, invoices, payment receipts, and other information should be consulted to ensure the lien amount is correct. A contractor that “routinely” files mechanic’s liens in Colorado without exercising due diligence could encounter significant financial consequences if the liens are challenged and found to be excessive.
An additional requirement in Colorado is that a notice of intent to file a lien statement also must be completed and served upon the owner of the property or the owner’s agent and the principal contractor or the contractor’s agent at least ten days before filing the lien statement with the country clerk and recorder. In order to be valid, the notice of intent to file a lien statement must be served by personal service or by registered or certified mail, return receipt requested, and addressed to the last known address of such persons, and an affidavit of such service or mailing must be filed with the county clerk and recorder. Basically, the purpose of the notice of intent to file a lien statement is to warn the adverse party that the mechanic’s lien will be filed if payment is not made.
If the lien is not satisfied within six months after the last labor was performed or materials were furnished, an action must be commenced to enforce the lien and notice filed with the county clerk and recorder of the commencement of the action. In other words, a lawsuit must be brought to enforce the mechanic’s lien and notice given to the county clerk and recorder of the lawsuit within six months from the date the work stopped on a job or was completed. Depending on the value of the lien, the action can be filed in small claims court, county court, or district court.
When it comes to challenging a mechanic’s lien filed in Colorado against your property, it is important to determine whether the person who filed the lien complied with each of the statutory conditions and deadlines. If the filing person did not fully comply, then the lien may be invalid and unenforceable. Colorado courts strictly apply filing and other mechanic’s lien deadlines. Mechanic’s liens also can be challenged by property owners if the property owner or someone acting on their behalf paid the contractor or subcontractor for his or her services (i.e., paid the contract amount and any other amounts due), provided certain conditions are met.
If you are a contractor or subcontractor, we can help you recover payment for services performed or materials provided on a project, including, if necessary, filing a mechanic’s lien. If you are a developer, contractor, or property owner, we can help you resolve or challenge mechanic’s liens related to a project. Please contact either me or any of the other attorneys at Proctor Brant, P.C. to discuss your situation.