HHMR handles all aspects of statutory mechanic’s lien claims, construction payment claims, and bond claims throughout the state of Colorado. The firm’s expertise in general construction litigation provides us insight into the business of construction professionals, including developers, general contractors, subcontractors, design professionals, and material suppliers. We have represented a wide variety of construction professionals and property owners in both the prosecution and defense of payment claims, bond claims, and mechanic’s lien actions. Our goal is to provide cost effective representation with an emphasis on practical results. Mechanic’s lien claims are technically demanding and require proper documentation, precise timing, and careful attention to the detailed requirements of the Colorado mechanic’s lien statute. We provide advice and assistance to companies to establish basic lien compliance procedures, review and/or filing of necessary documentation, and timely handling of litigation when necessary.
Primer on Colorado Mechanic’s Lien Laws
Colorado mechanic’s lien claims require strict compliance with C.R.S. § 38-22-101, et seq., and any failure to meet the requirements of the statute will potentially defeat the lien claim. The first requirement is that the Notice of Intent to File a Lien form be properly completed, signed, notarized, and served personally by certified mail or personal delivery on both the owner of the property and the general contractor of the project within four months of the last work performed on the project (or within four months of providing materials in the case of a supplier).
The Notice of Intent to File a Lien form should be completed in detail, referencing the legal description and address of the property, and the precise amount of the lien amount claimed. Mistakes or omissions in address, legal description, the basis for the claim, signatures, notarizations, and/or the exact amount owed on the claim can all become issues that jeopardize the claim. It is best to have a knowledgeable attorney review the completed form for technical compliance before serving it on the general contractor and owner. It is also important to verify the current name, registered agent for service, and address of the legal owner of the property before sending the Notice of Intent to File a Lien.
Formal service of the Notice of Intent to File a Lien on both the owner and general contractor must be completed within the four months following the last substantial work on the project. “Substantial work” does not usually involve punch list work, warranty work, removal of equipment, or cleanup. For this reason it is the best practice to file the Notice of Intent to File a Lien within sixty days after the last substantial work was done, in order to make sure that time requirements are easily satisfied without creating potential procedural compliance issues.
After the Notice of Intent to File a Lien is served on both the property owner and the general contractor, the claiming party must wait for at least ten days before recording the notice in the land records for the county in which the property is located. This recording process must also be completed within the four months after the last substantial work on the project by the subcontractor/material supplier. If the lienable property is located in multiple counties, the recording should take place in all counties where the land is located. Care must be taken not to record the lien claim notice(s) before the expiration of the ten day period provided in the statute. During this ten-day time period it is good practice to directly contact the parties served with the notice to attempt resolution of the claims. Once the notice has been recorded, it serves as public notice of the pending claim.
Within six months of the date of the last substantial work on the project, the party claiming the mechanic’s lien under the previously-sent and recorded notice must file a lawsuit to foreclose the lien and seek formal determination of the lien’s validity, compliance with procedure, and amount. A Notice of Lis Pendens must also be recorded in the land records when the mechanic’s lien foreclosure suit is filed. The foreclosure process must be handled by an attorney if the lien claimant is a corporation or similar business entity. It is once again important to use the services of a knowledgeable attorney with prior experience in handling mechanic’s lien claim actions in the foreclosure stage of the lien claim process.
Unless the original contract provides for a different amount, the lien bears interest at the rate of 12% simple interest, and it is possible to obtain an award of court costs. It is unusual to be awarded attorney’s fees, unless the claim is made under the Mechanic’s Lien Trust Fund provisions of the statute (discussed below).
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All mechanic’s lien claimants will typically be joined in the same foreclosure proceeding, and it is important to bring all potential or actual lien claimants into the case. While this may result in increased court costs, these costs are generally recoverable in the final order of judgment in the case. The principal challenge for most mechanic’s lien claimants is the priority of a commercial lender’s deed of trust on the subject property, and whether it will be senior to (i.e., have a higher priority than) the mechanic’s liens against the property. The date of the deed of trust typically decides this question.
All mechanic’s lien claims are given the same lien priority date, and it will be the first date that any mechanic’s lien claimant performed any work on the subject property that could give rise to a lien claim. Thus, even if a mechanic’s lien claimant did not perform early work on a project, that claimant’s work will be assigned a uniform priority date identical to the earliest work done by the mechanic’s lien claimant that performed the earliest work.
The Colorado Mechanic’s Lien Trust Fund Statute
The Colorado Mechanic’s Lien Trust Fund Statute, C.R.S. § 38-22-127, is a provision of the Colorado mechanic’s lien statute that presents both special problems for general contractors and special opportunities for subcontractors and material suppliers. It requires that when general contractors are paid for the work of subcontractors or for the materials supplied by others, the general contractor is required to hold the money “in trust” for the subcontractor or supplier. Any failure to pay money that is owed to the subcontractor or supplier under this “trust” requirement will create potential liability to the subcontractor or supplier on the part of the general contractor for up to triple damages and attorney’s fees for intentional non-payment to the subcontractor or supplier.
Additional information on this subject can be obtained by clicking on the link to an article written by HHMR that appeared in the January/February 2008 issue of The Colorado Builder Forum. https://www.hhmrlaw.com/publications/Builders_Forum.pdf
The applicability of the Colorado Mechanic’s Lien Trust Fund Statute to a particular case is very fact-specific, and should be discussed with a knowledgeable attorney to determine whether the provisions of the statute apply. If a construction professional has missed the deadlines to perfect a lien claim, or has otherwise relinquished those rights, it still has the ability to bring a claim for violation of the Mechanic’s Lien Trust Fund Statute.
The firm has the knowledge and experience to provide assistance to construction-related businesses with a construction lien claim, a non payment lien, payment claims, and all related matters. Please contact David McLain if you have matters that you would like to discuss concerning Colorado mechanic’s lien claims.
When facing statutory mechanic’s liens in Colorado, it is important to have the right legal team on your side. At HHMR, we are intimately familiar with these types of cases, and can help you to protect your assets and property from challenges by subcontractors and others. Call or e-mail us today to arrange for a meeting and find out more.
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