With payment problems in the construction economy having accelerated over the past few years, there has been a substantial increase in mechanic’s lien activity and associated litigation. The typical mechanic’s lien claimant is a material supplier, a trade subcontractor, or even a general contractor that has not been paid by the developer/owner of the construction project. The reason for filing a mechanic’s lien claim is that it offers the prospect in many cases to make the unpaid construction professional a priority creditor, with a lien on the real estate that is superior to the construction lender.
One of the primary rules governing a mechanic’s lien claim is that the creditor’s formal written “Notice of Intent to File a Mechanic’s Lien” (hereafter “Lien Notice”) must be (1) served on the owner of the property for which the work was done or the materials used, and (2) served at the same time on the general contractor who has handled the construction project. After the creditor has made service of the lien claim by USPS certified mail (using the green return receipt card for proof of service) or separate personal delivery of the notice to the property owner and general contractor, ten full days must pass (not including the date of mailing of the notices) before the lien notice is filed in the public records.
After ten days have expired following the date of mailing using certified mail, or personal delivery of the notice to the property owner and the general contractor, the lien notice can be filed to make the lien valid. The lien notice must be filed in the county land records where the property is located. This mailing and recording process must be completed within four months of the last substantial work done on the construction by the party claiming the lien. The required minimum ten-day waiting period between serving the lien on the owner and general contractor, and recording the lien means that a lien claimant actually should accomplish service of the Lien Notice not less than three and a half months after the creditor’s last substantial work on the project.
As a practical matter, it is advisable to work well within these deadlines rather than waiting until the four month window is about to close. The reason for this timing recommendation is that a creditor needs to (1) prepare a completely accurate Lien Notice; (2) locate and separately serve the notice(s) on both the property owner and general contractor; (3) wait at least full ten days after service of the notices, not including the date(s) of service; and (4) record a copy of the complete and served Lien Notice in the land records of the county where the work was done — all within the four-month period.
For practical reasons of timing and complying with the time limits of the mechanic’s lien statute, it is advisable to prepare and serve the written Lien Notice approximately 75 days after the last substantial work is done on the project. Most importantly, if there is any difficulty in serving the owner and general contractor parties by certified mail within the time allowed, it will be advisable to have them served personally by a professional process server. Under Colorado law, it is possible that a mechanic’s lien can be defeated in the end if the certified mail is sent to an incorrect address, for the property owner or the general contractor. It is best to send redundant lien notices to these parties if they have multiple addresses, or if you believe that they may be using multiple addresses without knowing which address is their primary address.
The two morals to this story are that if you have mechanic’s lien claims (1) try not to wait more than 75 days to begin the process of asserting the claim with formality by means of a written Lien Notice; and (2) send the notice to multiple addresses for the property owner and the general contractor if you are in doubt about which address is correct. If you send the notice(s) by certified mail, return receipt requested to any correct address, you are considered to have served the party.
Also, if you use certified mail, return receipt requested, and the addressee refuses to accept or sign for the certified letter, it will be returned to you by the USPS. Keep the letter in its returned condition for later proof that you served the notice, because mailing the certified letter (with the return receipt) is sufficient under Colorado law, as long as the notice was sent to the right address for the owner or general contractor. It does not matter for purposes of serving the required notice(s) that the certified mail was refused or never picked up by the addressee.
For additional information regarding Colorado construction litigation, please contact David M. McLain at (303) 987-9813 or by e-mail at mclain@hhmrlaw.com.
