For a contractor unaware, a mechanics’ lien is a useful legal tool for both securing and collecting on unpaid debt for services and/or materials that you have provided for a project. A lien is made against the property that the construction work took place on and doesn’t allow the owner to sell or refinance the property until the debt is paid. While being a relatively successful tool, contractors must follow state guidelines to have a lien secured. Often, many contractors succumb to various pitfalls because they are either unaware or ill-prepared when filing a mechanics lien. Don’t be a cautionary tale. If you are thinking about recording a lien, avoid these common mistakes.
1. File on Time
For contractors that only provided labor, the deadline to file is 2 months after the last day of labor was performed. Contractors that also provided materials have 4 months after the last day the materials or labor was provided.
2. Must Contact Property Owner Before Filing
Colorado requires that a contractor notify the property owner with an Intent to File a Lien Statement 10 full days prior to filing. This can be accomplished by sending the Notice of Intent to Lien, along with a copy of the Statement of Lien that is to be filed.
3. Don’t Overstate What You’re Owed
If the lien amount is overstated or found to be inaccurate then not only is the lien rendered invalid, but the contractor can be forced to pay the opposing party’s legal fees.
4. Avoid Technical Mistakes
Even the smallest mistakes can result in a lien being unenforceable. Errors such as an inadequate property description or signing blunders can result in the lien being invalidated.
5. Abide by the Foreclosure Deadline
After a lien is awarded, it is valid for only 6 months. A contractor must file for the lien’s foreclosure/enforcement within that time frame, or risk forfeiting their lien rights.
There are limitations to a mechanics lien, such as, it does not apply to public projects and contractors can run into problems if the Notice of Intent is not properly served. If a contractor is unable to follow legal procedure when filing a mechanic’s lien, not only can the request be denied, the contractor can be ordered to pay for the property owner’s legal fees.