A contractor’s tool to getting paid – Colorado’s Mechanic’s Lien
A mechanic’s lien is a legal tool for an individual to get paid for work or materials supplied to a project when the owner or general contractor does not pay for the work.
For example, it is the end of a four-month kitchen remodel construction project and the owner does not want to make a payment until he is satisfied the project is complete. The contractor requests final payment because all inspections have passed and the permit is closed, but the owner still refuses to pay. This situation creates problems for contractors who may have outstanding invoices for materials or laborers who need payment for the work they provided on a job.
Owners withhold payment for various reasons: dissatisfaction with the quality of work, inability or unwillingness to pay because changes in the work or unforeseen circumstances increased the construction budget, or disputes arise as to what work remains unfinished and whether or not that work is warranty work or punch-list items. While the reasons for nonpayment are plentiful, Colorado’s mechanic’s lien may provide a remedy for an individual to get paid.
In Colorado, every person who furnishes labor, machinery, tools, or equipment used in the construction or repair of any improvement to land may file a lien upon the property where they rendered their services. Those who build a structure, dig a ditch, install a fence, or provide the materials to do any of these projects may have the right to lien if they do not get paid. Mechanic’s liens are not only for contractors either. Surveyors, designers, planners, map creators, cost estimators, superintendents, engineers, and architects are among the class of people the law allows to file a mechanic’s lien.
What is a lien? A lien is a right to take possession of another person’s property for a debt that is owed by the property owner, until the debt is satisfied. This means that the kitchen-remodel contractor may claim an interest in the home where he performed his construction services. The purpose of a mechanic’s lien is to protect those who add value to and enhance another’s property by providing labor, materials, and/or services.
The four basic components of a mechanic’s lien are: (a) providing the work or materials specified under the law; (b) for the benefit of specific real property; (c) at the request of the property owner or property owner’s agent; and (d) abiding by the law’s requirements for perfecting and enforcing the lien. To perfect and enforce the mechanic’s lien, the person claiming the lien must provide the property owner a notice of intent to lien at least 10 days before filing the mechanic’s lien. A notice of intent to lien must be personally served or mailed, via certified mail, return receipt requested, to the last known address of the property owner. The person claiming the lien must include an affidavit of service certifying that notice was provided 10 days before recording the mechanic’s lien.
After serving the notice of intent to lien and waiting 10 days, the person claiming the lien must file the lien with the county clerk and recorder in the real property records where the real property is located. The mechanic’s lien statement must include: (a) the name of the property owner; (b) the name of the lien claimant (the person who furnished the labor or materials) and the name of the contractor when the lien claimant is a subcontractor; (c) a description of the property; and (d) the amount due or owing. A person claiming a lien should be careful in determining how much is due and owing because the individual forfeits all rights to the lien (and may be responsible for the other person’s costs and attorney fees) if the lien is filed in an amount greater than the lien claimant knows is due and owing. The lien statement must be signed and sworn to by the lien claimant or someone on their behalf. A lien claimant is entitled to receive interest on the lien at the interest rate established by a contract or at Colorado’s statutory interest rate of 12%.
There are tight timelines for when a lien may be filed that range between 2-4 months from the date labor or materials were last performed or provided. However, these timelines can vary depending on different circumstances, including, but not limited to, the type of work or materials provided, abandonment of the work, or the project remains unfinished. Once a person has perfected the lien, meaning the lien claimant provided a notice of intent to lien with proof of service and correctly filled out and recorded the lien statement, they must foreclose on the property in order to collect on the lien. A foreclosure action needs to begin within 6 months from the date the last labor or materials were provided or the project was completed. If a foreclosure action is not started, the person claiming the lien will not be able to enforce the lien after the time for foreclosure has passed.
In short, mechanic’s liens can be useful when a contractor or other professional who assisted in the construction or improvement to real property does not get paid. There are strict requirements as to the procedures to follow in order to make the lien enforceable. If an owner still refuses to pay, a foreclosure action must begin in order to preserve a lien claimant’s right in their interest to the real property they helped improve. With quick and varying deadlines based on the specifics of each individual case and the strict procedural requirements, Johnson Law is here to ensure your mechanic’s lien is valid so you can get paid. Call us and speak with one of our attorneys today to discuss the specifics of your case and how Johnson Law may assist you.