Overview and Facts: Mechanic's Liens

Overview:

Colorado has a Mechanic's Lien statute which affords contractors and material suppliers a process by which they can be afforded payment protection upon materials and labor supplied to improve a parcel of real property. This statute provides that a lien can be placed upon the real property which was improved or received the benefit of the goods or services which obligates the Owner of the property to pay, or ensure payment is made, for such goods or services even if such Owner had no direct contact or contract relationship with the person or entity providing the goods or services. The Courts have strictly construed this statute; thus, full and accurate compliance with the statutory requirements is imperative.

The statute also provides all lien claimants will receive a priority date for their lien which relates back to the commencement of the project. In some cases, a mechanic's lien may have priority over a deed of trust recorded prior to the commencement date. This priority becomes especially important when a project fails and the bank, who provided the improvement or construction financing, is forced to resolve or clear the liens to protect its interests.

Requirements to create a Mechanic's Lien:

To create a valid a mechanic's lien on a parcel of real property the person claiming the mechanic's lien must do the following:

1) Be able to demonstrate that materials, labor or services were supplied which were a benefit to the property.
2) Be able to demonstrate when such materials, labor or services were supplied.
3) Prepare a Notice of Intent to File a Mechanic's Lien and serve upon the owner of the property and the general contractor within the statutory time limit.
4) Afford the owner 10 days in which to resolve the claim of lien.
5) After the 10 days have passed, file the Mechanic's lien with the County Clerk and Recorder in the County where the real property is located, no later than the time period specified by statute. For most actions this is 4 months; however, in certain instances involving single family dwellings, this period may be a short as 30 days.
6) Commence suit upon such Mechanic's Lien within 6 months after the last work is supplied to the parcel of real property. In such suit, all parties claiming an interest in the real property, including the general contractor, must be joined as parties. Any Mechanic's Lien which is recorded with the Clerk and Recorder but upon which no Court action is initiated with 1 year from the date of filing of such lien will lapse and be void.

Important note: As it may be difficult to quickly identify the true owner of the real property or obtain a legal description of such property it is wise to start the lien process as soon as possible after it becomes clear the debt will not be timely paid. Since the actual lien process takes a minimum of 11 days, it would be wise to contact counsel at least 30 days, preferably 60 days, prior to the expiration of the 4 month time limit.

I have prepared a checklist of necessary information required to initiate the process of preparing a Mechanic's Lien. Please feel free to download this list and use it to assemble the information needed at our initial conference.

NOTE: You may have to click on "File" then "Save as" using the tool bar in your browser.