Bad Contractors: Colorado Homeowner Rights and Legal Options

You should be able to trust your contractor to create the kitchen of your dreams or perform emergency repairs on your plumbing. When a bad contractor performs shoddy work, holds up the project, or never completes the job, you may be able to recover damages and protect your property. 

Colorado homeowners have specific rights regarding home improvement contracts and construction work on their homes. Understanding those rights can help you decide what to do next and when it is time to bring in a real estate litigation attorney.

• Colorado homeowners have rights against contractors who breach a home improvement contract, cause unreasonable delays, or perform work that is not completed in a workmanlike manner.

• Your home improvement contract should clearly spell out the scope of work, project timeline, completion date, payment schedule, necessary permits, and dispute resolution terms.

• It is risky to stop paying a contractor or refuse final payment without legal guidance. The contractor may respond with a mechanic's lien or their own breach of contract claim.

• Misuse of your down payment or progress payments can lead to civil theft and Colorado Construction Trust Fund Statute claims.

• Homeowners can challenge invalid liens, unlicensed work, and violations of the Colorado Consumer Protection Act.

• Consult a real estate litigation attorney to evaluate if the potential recovery outweighs the cost of a lawsuit.

When you hire someone to work on your home, you are trusting them with one of your most important assets. Colorado law recognizes that, and it gives homeowners a set of protections meant to keep projects safe, lawful, and financially fair.

These rights often cover:

• Work performed in a workmanlike manner that meets building code, safety standards, and the intended use of the space.

• Proper building permits, including mechanical, electrical, plumbing, or structural permits when required.

• Truthful representations about licensing, bonding, and insurance, so you know the contractor is qualified and insured for the work.

• Proper handling of construction funds, including deposits, down payments, and progress payments, without misusing the money for unrelated projects.

• Accurate and timely lien filings under Colorado Mechanics Lien Law, with the correct amount, notice, and deadlines.

These rights give you a framework for identifying when a contractor may have crossed a legal line. How they apply in your situation will depend on your contract, local city and county rules, and the specifics of the project.

Worried your contractor is going off track? A Colorado real estate litigation attorney can outline your rights and next steps. Get legal guidance.

Unless you are a master at DIY projects, most major home and business construction projects involve some kind of contractor.

In Colorado, a contractor is anyone who performs work that requires a building or mechanical permit. A laborer who works under a contractor’s supervision is not considered a contractor. Contractors must abide by state and local building codes, which often require obtaining permits for construction projects. 

Here are the three different kinds of workers you may encounter if you hire someone to work on your property.

• General contractors supervise a construction site.

• Subcontractors are skilled tradespeople who perform specialized work.

• Handymen perform maintenance or repair work inside and outside a property.

Some trades, such as electricians and plumbers, must obtain state licensure before applying for a local license. General contractors and roofers are commonly licensed or registered at the city or county level. Requirements vary widely: some municipalities require testing, others accept proof of experience, and some require additional business certifications.

Before examining real-world examples, it is helpful to understand why these distinctions are important. The type of professional you hire significantly impacts permitting requirements, the standard of workmanship expected, who is legally responsible for different aspects of the project, and the recourse available if something goes wrong. These examples illustrate how roles differ in everyday Colorado home improvement scenarios

Example: A New Kitchen Space

Let’s say you want an open-concept kitchen and living room. Currently, your kitchen, living room, and dining room are three separate spaces. This project requires the expertise of various specialists to ensure, for instance, that no load-bearing walls are demolished or any necessary rewiring is performed to code.

A general contractor will oversee the entire project and:

• assess the plans,

• pull permits,

• create a project timeline,

• hire and manage subcontractors for plumbing, electrical, demolition, and finish work. 

Example: Small Home Repairs

You have a few items around the house that need attention. The guest bath has a leaky toilet, and you’d like a dimmer installed in your dining room. For these jobs, a handyman would be useful. A handyman may also take on larger jobs such as rebuilding a deck or tiling a backsplash, depending on local licensing rules. They often handle: 

• Simple repairs

• Routine maintenance

Smaller home improvement tasks that do not require specialized licensing

Contractor disputes arise for many reasons. Colorado law provides remedies depending on the type of issue.

A breach occurs when a contractor fails to meet contract terms.  Some breaches are obvious, while others emerge gradually as costs climb or work quality declines. 

Contract breaches happen for many reasons:

• Botched craftsmanship

• Excessive delays

• Unauthorized cost increases or change orders

• Failure to follow plans, permits, or building codes

• Ignoring communication or refusing to correct problems

If your contractor has failed to live up to the promises they made for the project, you may have a breach of contract claim.  That said, a breach can be difficult to prove if there isn’t a written contract. If you breach your duties without justification, you may forfeit rights to a claim.

To prove the contractor breached the contract, you must:

• A valid contract existed (written or oral in Colorado)

• You met your obligations or were ready to perform them

• The contractor failed to meet their obligations

• You suffered financial or property‑related damages

There’s a breach. How much money can I recover?

The amount of damages you can recover from a bad contractor depends on the nature of the breach. Is it a material breach or a non-material breach? Let’s explore the difference between the two breaches.

• Non-material breaches are minor in nature. A non-material breach does not hinder the project’s outcome. If you suspect your contractor committed a non-material violation, you are still obligated to the contract. 

• Example of this in action:.

A plumber installs pipe brand X under your kitchen sink. The contract calls for pipe brand Y. Brands X and Y are made of the same materials and have the same quality. Since the contractor did not use the brand specified in the contract, they have breached the agreement; however, this didn’t alter the outcome.

• Material breaches are serious problems. A material breach significantly affects the contract and the project’s outcome. If there’s a material breach, you are not obligated to fulfill your contractual obligations because the other party breached the contract. Example of this in action:

The contract you signed with your plumber states that he must install copper pipes throughout your newly built home. Instead, he uses PVC pipes, which may constitute a material breach due to the difference in materials and their consequent ability to hinder the project’s outcome.

You can recover damages from both kinds of breaches, but it’s difficult to put a number on how much before speaking with an attorney. They’ll be able to assess the type of breach that may have occurred and provide recommendations for next steps, as well as estimates of damages.

Construction delays are common, but unexpected situations can create delays beyond your control or that of the contractor. Regardless, Colorado contractors have an obligation to follow the delay terms outlined in your contract. Many agreements specify when you can seek compensation or cancel the contract. These delays fall into two categories: excusable and inexcusable delays.

Excusable Delays

Most contracts limit the contractor’s liability for certain delays, such as: Here are some Examples of excusable delays:

• Severe weather

• Labor strikes or shortages

• Owner‑initiated design changes

• Unforeseen site conditions (e.g., hidden structural issues)

Excusable delays generally give a contractor more time to finish the project, but they do not entitle the homeowner to damages.

Inexcusable Delays

Inexcusable delays are caused by the contractor’s actions or poor management. Examples can include: 

Inexcusable delays can include:

• poor planning

• not obtaining proper materials/equipment

• late project start

• quality failures

Inexcusable delays may entitle you to monetary damages or contract termination. Your contract may state how you are to be compensated for these delays.

• Contractors and owners get paid for delays, known as liquidated damages.

• A contractor receives an extension based on delays beyond his control

• The contractor may be required to accelerate work to meet the deadline.

• The contract can be terminated for significant inexcusable delays.

No Damages for Delay Clauses

Now, if there is a “no damages for delay clause” in your contract, you or your contractor won’t owe money because of the delay. For example, a contract may absolve the contractor of financial responsibility if they create a delay.

Some states have outright banned “no damages for delay” clauses. However, Colorado still enforces this provision in private contracts.

There are some exceptions to enforcing this provision if it’s in your contract. A “no damages for delay” clause cannot be enforced if:

• there is active interference by a party,

• there are delays outside of the scope of the contract, or

• a contractor acts with fraud or bad faith.

If you have one of these clauses in your contract and are experiencing a delay, talk to a real estate litigation attorney. They’ll be able to determine whether the “no damages for delay” is unenforceable, so you can seek damages. In extreme circumstances, you may be entitled to terminate the contract altogether.

Workmanship is the skill and quality a contractor puts into a project. Whether it’s a toilet installation or simple tile work, the caliber of the work - good or bad – is the workmanship.

A construction contract lays out many elements of the job. Workmanship is not always one of them. Often, craftsmanship expectations are implied or expressed, rather than written down.

If a contractor skips vital steps, the finished product may lack the quality you expected.

Examples of Poor Workmanship

• loose railing on a deck

• a gap between hardwood flooring and baseboards

• uneven kitchen cabinet doors

• Incorrect electrical or plumbing installation

• Sloppy tiling or unfinished surfaces

If your contract does not address expected quality, it can be challenging to prove poor workmanship. But that doesn’t mean it’s not impossible.

Poor workmanship can lead to future problems, such as mold, flooding, and electrical issues. If your contractor turned out to be a bad contractor who performed subpar work on your home, a real estate attorney will look into everything about the job and contract. For instance, your attorney will:

• establish the industry standard for the job you hired your contractor to perform,

• review the emails between you and your contractor for conversations that imply a standard of workmanship, and

• demonstrate if sub-standard materials were used instead of premium materials as promised.

In Colorado, local municipalities license or register general contractors, including roofers and repairmen. Electricians and plumbers must obtain state licensure before applying for a local license.

Licensing and registration rules vary between municipalities. Some cities require testing, some don’t. In some towns, contractors are required to hold a current license issued by another county or city. Some Colorado cities, such as Denver, require additional certificates, like a business license.

If you hire an unlicensed contractor, you’re undertaking most of the risk. You may face:

• little legal recourse against the unlicensed contractor

• liability for any injuries that occur during the course of the project

• a lack of insurance coverage for property damage by the unlicensed contractor

Lawsuits for Deceptive Trade Practices

If multiple people have been affected by the same unlicensed bad contractor, you may be able to file a lawsuit. The Colorado Consumer Protection Act (CCPA) protects you from deceptive trade practices.

An unlicensed tradesman can be sued for violating the CCPA.

To mount a successful Consumer Protection Act claim, you must show:

• the contractor’s actions constitute a deceptive trade practice,

• the action must have occurred while they worked as a contractor,

• there must be a significant effect on actual or potential customers,

• an injury of a legally protected interest resulted from the conduct, or

• the contractor caused actual damages to the client.

If it’s proven that your contractor acted in bad faith when they violated the CCPA, you can be awarded three times the amount of the actual damages.

If you give a contractor money up front in Colorado, state law requires them to deposit the funds into a trust. If they fail to do this or misuse the funds in the trust, you may be able to sue them for civil theft. 

The Colorado Construction Trust Fund Statute requires contractors to place your payments into a trust for your project. The money must be used to:

• Pay subcontractors

• Purchase materials

• Cover project‑specific expenses

Misuse of funds occurs when a contractor:

• Uses your payment to cover old debts

• Fails to pay subcontractors

• Withdraws funds for personal use

This law was created to deter contractors from robbing Peter to pay Paul, if you will. Here’s an example:

You hire a contractor to update your bathroom. He asks for a quarter of the project’s cost upfront. Unbeknownst to you, your contractor has not paid subcontractors working on other projects. So he uses your money to satisfy those debts. But then, he can’t pay the subcontractors working on your bathroom. You’re in the dark until subcontractors file a lien on your property for nonpayment.

It’s scary to find out a subcontractor intends to file a mechanic’s lien against your property. But you have legal options, some of which are more cost-friendly than others.

Send a Demand Letter to the Bad Contractor

A demand letter is often one of the first steps a litigation attorney takes in a case that involves a potential civil suit. Why? Sometimes a strongly-worded demand letter from a lawyer is all that’s needed to resolve a problem. And it doesn’t involve all the costs that come with filing a lawsuit.

In the case of a bad contractor, all you may need to do to recover your money or get the lien removed from your property is to pay a good real estate attorney to write a hard-hitting demand letter.

Sue the Bad Contractor

Now, if a demand letter doesn’t fix the problem, then you might have to weigh the pros and cons of filing a lawsuit.

The good news is that if you have a strong case of a bad contractor violating the Colorado Construction Trust Fund Statute, then the court can award three times your actual damages and attorney fees if the contractor violated the Colorado Construction Trust Fund Statute.

Need guidance before the situation escalates? Our attorneys can review your contract, documentation, and next steps. 

Schedule a case assessment

State law protects contractors and subcontractors from non-payment. The Colorado Mechanics Lien Law allows contractors to file a lien against real estate — on your house, for instance — if they are not paid for their work.

A contractor can enforce the mechanic’s lien and have the house foreclosed to recover money for the unpaid services.

I have a mechanic’s lien. Can I get it removed?

The short answer is yes.

Liens can be rendered invalid if a contractor does not follow the correct filing process. For instance, if the contractor does any of the following, your lien could be deemed invalid:

• Files late. If a contractor supplies only labor, they have two months from the last day workers are on the job to file. If the contractor also provides materials, the deadline is extended to four months.

• Fails to notify you. Contractors must provide the property owner a Notice of Intent to Lien at least 10 days before acting.

• Overstates how much you owe. The amount of the lien must reflect the balance due, and it cannot exceed the price of the contract.

• Makes technical mistakes on the paperwork. The lien must be notarized, include a sufficient property description, and be signed, among other procedures.

• Misses the foreclosure deadline. A lien is only valid for six months. After that, the contractor forfeits their lien rights.

Get a Lien Removed From My Property

If the contractor fails to foreclose, the lien remains on public record, but it is not legally enforceable. That means you may need to have it removed. A quiet title action can do the trick, and your attorney can do this for you.

A quiet title action can remove mechanic’s liens that have expired or a debt that has been paid. In simple terms, a quiet title action challenges a lien’s validity. Confirming the title rights lifts challenges to the property.

If you hire a contractor or handyman to work on your home or business, you may sign a construction contract.

This contract sets expectations and safeguards both parties involved in the project. Contracts provided by the contractor often include clauses or provisions that benefit them. These obscure passages are usually in fine print, on the back side of pages, and written in difficult-to-understand legalese.

It’s always a good idea to have a real estate attorney review the construction contract before you sign it to ensure you know what you’re getting yourself into.

To protect yourself as a homeowner, your construction contract should include:

• scope of work

• start and finish dates

• permit acquisition

• project cost and payment terms

• materials to be used

• contractor’s and owner’s responsibilities

• owner’s right to cancel

• project change policy (“change order”)

• liquidated damages clause

You may be familiar with some common contract terms, such as “scope of work” and “permit acquisition.” Here’s an overview of other terms that may not be as familiar:

Owner’s Right to Cancel

Colorado law allows some homeowners to cancel a contract within three days of signing it. Roofing contractors are required to notify clients that they have the right to rescind the contract within a specified timeframe. The homeowner is entitled to a full refund of any deposit.

Project Change Policy

A “change order” occurs when you or the contractor alters an aspect of the project after the contract takes effect. Changes can impact budgets, extend timelines, and increase labor costs.

Construction contracts often include a provision regarding the handling of project changes. Changes may require written confirmation, and both parties must sign off on them.

A policy like this can reduce change order abuse by contractors who attempt to increase costs.

Project Cost and Payment Terms

On the surface, cost and payment terms sound straightforward. But the homeowner can be harmed if they don’t carefully read this section.

Most homeowners enter into a fixed-price agreement. Ideally, this keeps costs down. However, a contractor or handyman may cut corners to stay on budget. A bad contractor could abuse change orders to inflate the price of the work.

Your contract should explain how and when progress payments are due and what happens if you withhold payment because of defective work or delays.

Liquidated Damages Clause

The liquidated damages clause limits damages. Often, the clause pertains to a project’s deadline. If either party breaches the contract—for instance, creates a delay—a pre-set amount is paid to remedy the breach.

This provision serves two purposes:

• motivates the contractor and client to stay on track

• compensates either party for potential losses due to delay

Example: Liquidated Damages in a Remodel Project

A bed and breakfast owner hires a contractor for a full remodel. Both parties agree to a liquidated damages rate of $700 per day if either side causes a delay. The project is scheduled to take five months, but it has run four weeks late.

Contractor Causes Delay:

The contractor fails to get a necessary tool. The carelessness delays the reopening of the bed and breakfast by 28 days. The B&B owner may have lost revenue during that additional closed month. However, it’s difficult to say how many guests they would have served during that time.

The owner is entitled to $19,600 in liquidated damages.

Owner Causes Delay:

The bed and breakfast owner changes some remodeling elements, which creates a delay. The contractor incurs extra overhead costs and misses out on other work.

The contractor receives $19,600 for the additional expenses.

Mechanics Lien Notice

Contractors who are not paid for their work often file liens against the property. The owner cannot sell or refinance the home as long as the lien remains enforceable.

Builders, material suppliers, and architects can also impose a mechanics lien.

There are instances when the lien can be removed. For example, if a contractor places a lien on your home for more than what you actually owe.

If you don’t have a contract and you encounter a bad contractor, it’s always best to have agreements in writing. In Colorado, however, you do not have to have a written contract to sue a bad contractor or handyman. Oral contracts are still honored, and homeowners have legal remedies available to them without a signed formal contract.  These cases require more evidence and a clearer demonstration of what both sides agreed to, but they are absolutely actionable when handled correctly.

You can support your claim with:

• Emails, text messages, or written estimates that show scope, price, or timeline expectations

• Proof of work performed, such as photos, invoices, delivery receipts, or job-site logs

• A contract signed only by you, which can still signal your intent to enter an agreement

• Payment records (Zelle, Venmo, checks, bank transfers) showing the financial relationship

• Evidence of communications about changes, delays, or concerns

Colorado courts look at the conduct of both parties to determine whether an agreement existed and what its terms were. Without a written contract, disputes become more fact-driven, but they are still winnable when documentation, witness statements, and payment history support your position.

Lack of a written agreement makes disputes harder, but not impossible, especially when safety issues, defective work, or misuse of funds is involved.

No written agreement? You still have rights.

Talk to a Colorado attorney

If you believe your contractor strayed from the contract, contact us to schedule a case assessment. Our real estate litigation attorneys can help you determine whether a breach has occurred.

• Suing a Contractor for Poor Workmanship

• Contractor Fraud and Red Flags

• Understanding Colorado Mechanics’ Liens

• What to Do About Unpermitted Work

You may be able to withhold part of a payment if the work is defective, incomplete, or not performed in a workmanlike manner. Colorado homeowners generally cannot refuse all payments without risk. A full stop-payment can lead to a mechanic’s lien or a claim that you breached the contract. Before withholding anything, document the defects, review your home improvement contract, and speak with a Colorado attorney to avoid escalating the dispute.

Start by documenting the unfinished or defective work through photos, written notes, and a timeline of events. Stop making additional payments until you have legal guidance. A Colorado real estate litigation attorney may recommend a demand letter, pursuing a civil theft claim under the Colorado Construction Trust Fund Statute, or challenging any lien the contractor files. These remedies can help recover funds and pressure the contractor to resolve the issue.

It depends on the amount of damage, the strength of your documentation, and whether statutes that allow attorney fees or treble damages apply. For serious issues (such as misuse of funds, severe defects affecting safety or intended use, or unlicensed work), real estate litigation may be worthwhile. For smaller disputes, negotiation or a demand letter may resolve the issue faster and at a lower cost. An attorney can help estimate the realistic financial outcome.

Usually no. Independent contractors are expected to carry their own workers’ compensation or liability insurance. You may be liable only if you created or ignored a dangerous condition on your property, or if the contractor was misclassified and functioned like an employee. If a contractor or worker is injured, have an attorney review your contract, insurance coverage, and the circumstances immediately.

Document defects clearly, communicate concerns in writing, give the contractor a chance to fix the issues, and review your contract for workmanship standards or warranty terms. If the contractor refuses to correct the work, you may pursue remedies such as withholding part of the final payment, filing a breach‑of‑contract claim, or seeking damages for defective work. Poor workmanship that creates safety hazards may strengthen your legal position. 

Colorado homeowners can challenge liens that are late, overstated, improperly filed, or unsupported by valid work or materials. If the lien is abusive or inaccurate, an attorney may pursue a quiet title action to remove it. Defective or unlicensed work may also undermine the contractor’s lien rights. Documentation of workmanship issues and payment history is critical for disputing a lien.

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