Colorado law generally permits a contractor, or subcontractor, who has worked to improve a piece of real property to record a lien against the property if unpaid. This is a powerful tool for contractors, as a mechanic’s lien affects the property owner’s title to the property, including the ability to sell it. A mechanic’s lien can also be foreclosed on, which if left unaddressed by the property owner can eventually result in the property being sold and the proceeds applied to your outstanding contract.
However, there are specific rules for filing and foreclosing on mechanic’s liens, which if not observed can potentially reduce or eliminate your ability to pursue a mechanic’s lien claim.
Who can record a mechanic’s lien?
Colorado’s mechanic’s lien statute provides a detailed description of who can record a mechanic’s lien:
Every person who furnishes or supplies laborers, machinery, tools, or equipment in the prosecution of the work, and mechanics, materialmen, contractors, subcontractors, builders, and all persons of every class performing labor upon or furnishing directly to the owner or persons furnishing labor, laborers, or materials to be used in construction, alteration, improvement, addition to, or repair, either in whole or in part, of any building, mill, bridge, ditch, flume, aqueduct, reservoir, tunnel, fence, railroad, wagon road, tramway, or any other structure or improvement upon land, including adjacent curb, gutter, and sidewalk, and also architects, engineers, draftsmen, and artisans who have furnished designs, plans, plats, maps, specifications, drawings, estimates of cost, surveys, or superintendence, or who have rendered other professional or skilled service, or bestowed labor in whole or in part, describing or illustrating, or superintending such structure, or work done or to be done, or any part connected therewith . . . . .
Essentially, any person who has done work or supplied tools or materials to improve, alter, or repair real property may well have the ability to pursue a mechanic’s lien claim if unpaid.
What real property can I record the mechanic’s lien against?
A mechanic’s lien generally extends to the entire parcel of property where work is performed. The applicable statute provides that “[t]he liens granted by this article shall extend to and cover so much of the lands whereon such building, structure, or improvement is made as may be necessary for the convenient use and occupation of such building, structure, or improvement, and the same shall be subject to such liens.”
What dollar amount can I include in a mechanic’s lien?
Generally, the mechanic’s lien can be for the contract price of all labor and materials furnished but not paid for. There are penalties for knowingly recording an excessive lien, including potentially discharge of the lien and an assessment of the other side’s attorney’s fees, so it is important to include an accurate dollar amount of what is due or owing.
What does the mechanic’s lien statement need to contain?
Colorado law places a number of requirements on the contents of a mechanic’s lien statement. Generally, these include:
- the name of the owner or reputed owner of the property, or in case such name is not known to to the party asserting the lien, a statement to that effect;
- 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 by the assignee of a subcontractor, or, in case the name of such contractor is not known to the party asserting the lien, a statement to that effect;
- a description of the property to be charged with the lien, sufficient to identify the same; and
- a statement of the dollar amount due or owing to the party asserting the lien.
Additionally, the mechanic’s lien statement must contain the notarized signature of at least one of the parties claiming the lien or by someone acting on the party or parties’ behalf, such as an attorney, and contain a statement by the signatory acknowledging that the statement is true to the best of his or her knowledge, information, and belief.
What are the timing and notice requirements for pursuing a mechanic’s lien?
Colorado law places certain timing and notice requirements on mechanic’s liens. Generally, the first step is to send a notice of intent to lien, by certified mail or personal service, to the owner and primary contractor(s). After waiting at least ten days, the mechanic’s lien statement, described above, can then be recorded with the county clerk and recorder for the county where the property is located.
Importantly, a mechanic’s lien must generally be recorded within four months of the last day that the party asserting the lien provided laborers or materials. If the party asserting the lien provided labor directly, rather than through hired laborers, and did not supply materials, the recording period is generally two months from completion of the building, structure, or other improvement.
Following recording of the lien, and if a settlement cannot be reached, a lawsuit must be filed within six months of either the last day that labor or materials were supplied or completion of the building, structure, or other improvement. In addition to the lawsuit, a notice of the pending litigation must be recorded with the county clerk and recorder.
Beyond the lien for labor or materials, are there any other remedies for non-payment available to a contractor?
Often yes. Generally, the property owner and/or general contractor might be liable for damages for breach of contract (including potentially attorney’s fees, if there is a supporting provision in the contract) as well as for equitable remedies for unjust enrichment.
Additionally, if the general contractor or an upstream subcontractor received money intended for payment for labor or materials a subcontractor supplied, and instead disbursed the money elsewhere, they may be liable for a trust fund violation. In this case, a contractor that improperly disburses money intended for payment to a subcontractor can be held liable for treble (triple) damages and the subcontractor’s attorney’s fees.
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