By Jennifer Knight Lang
Mechanics’ liens are strong tools to secure payment for work performed or labor, materials or equipment furnished for construction projects. Failure to comply with Colorado’s mechanics lien statute can result in a loss of lien rights. However, as long as a party strictly complies with the statutory requirements for perfecting and recording a mechanic’s lien, courts will liberally construe the remedial provisions of the statute to protect those who provide value to construction projects.
Who is Entitled to Record a Mechanic’s Lien Statement?
Contractors of every tier, architects, engineers, material suppliers, providers of temporary labor, laborers, and those who render skilled or professional services for construction projects may file a mechanic’s lien in Colorado to secure payment for their work, materials, or services, as long as they have done so at the insistence of the owner or an agent of the owner. Anyone in the chain of contractual privity with the owner can be considered their “agent” and can confer lien rights upon a party by requesting that party’s labor, services, tools or equipment for a construction project.
Do You Need a Contract to Have Lien Rights?
Contracts do not need to be in writing to support a lien claim, although written contracts can strengthen a claim by showing the scope of work and agreed price. The lien claimant needs to show that its work, services or materials were provided for a specific project at the request of the owner or their agent. Suppliers must show that they provided their materials specifically for the project in question. For example, a retailer who sells nails to a contractor for no particular project has no lien rights on the project where those nails might ultimately be used. Materials vendors should have invoices listing the property address and should track and keep delivery tickets to show that the materials were delivered as directed by the party purchasing materials for the project.
What Property is Subject to a Lien?
A mechanic’s lien should be recorded against the property where the construction project is located. A lien statement typically includes the legal description of the property, along with a description such as a street address or development name for ease of identification. To avoid confusion, parties can include the legal description of the property in the contract.
Mechanics’ liens affect title and encumber the interest of the property owner when recorded. The property owner can be a fee simple owner, lease holder or anyone contractually authorized to construct improvements on the property. Lessors or others who have not contracted for the work to and who don’t want their interest in the property to be subject to a mechanic’s lien claim may post a notice of nonliability within five days after obtaining notice of the work to be done.
What is the Amount of the Lien?
A claimant can record a mechanic’s lien for the value of the work or materials furnished for the project. The lien should not include double-counting, attorneys’ fees or penalties, charges unrelated to the work, credits that should be applied to the amount owed (i.e., back charges) or charges that might fall under a prior valid lien waiver. Calculated interest and late fees should not be claimed, but a lien statement can note that the amount claimed is subject to interest at the contractual rate or, if the contract does not specify, the statutory rate (12%).
What is the Process for Filing a Mechanic’s Lien?
Per the statute, the deadline to record a lien statement is four months (not 120 days) after the last work performed or last material delivered by the claimant. At least 10 days before recording a lien statement, a notice of intent to file a lien statement must be served upon the owner (or reputed owner/owner’s agent) of the property and the principal or prime contractor (or its agent). The notice must be served either by personal service or registered or certified mail, return receipt requested, at the recipients’ last known address. Affidavits of service or mailing of the notice must be recorded with the lien statement.
After that 10-day period, the lien statement must be recorded with the county clerk and recorder in the county where the property is located no later than four months after the lien claimant’s last date of work. It is important to ensure that the notice of intent is served early enough that the 10-day period will not end after the four-month deadline for filing the lien. The statement must include the property owner’s name, the lien claimant’s name, the general contractor’s name if the lien is claimed by a subcontractor, the property description and the amount due to the claimant. The statement must be signed and sworn by the claimant, typically before a notary.
The deadline to file a legal action to foreclose on the lien is six months after project completion. It is prudent to calculate the foreclosure deadline from the lien claimant’s last date of work performed or materials delivered. It can be adjusted if the date of the project’s completion is determined to be later. Since strict compliance with all statutory deadlines is critical to maintaining a valid lien claim, calculating deadlines conservatively can build in a buffer to ensure that no deadlines are missed. Another option in addition to (or instead of) filing a mechanic’s lien is sending a notice to disburser, which prevents the owner from issuing payment to the general contractor or any other contractors or material men on the project without holding back the amount owed to the claimant. Mechanics’ liens are a powerful mechanism to obtain payment on a project for value provided to that project, and understanding the specific statutory requirements for pursuing liens is crucial to protecting
Jennifer Knight Lang is a litigator in Moye White’s Denver office who counsels and advises clients in construction and real estate matters to help them navigate risk in contentious situations. She provides comprehensive representation in matters involving lien and bond claims, contract rights and remedies, nonpayment actions, delay claims and property rights issues.