Fighting Back Against Contractor’s Liens and Protecting Your Property
Contractor’s liens (called “mechanic’s liens” in Colorado) are not only a tool used by auto mechanics to ensure they are paid for their labor and materials provided in repairing automobiles. But the same principle is often used by those who provide labor and materials in the improvement of real property. For instance, if you’ve ever hired a contractor to remodel your bathroom, add on a room, or make some other improvement to your home you may one day find that a subcontractor or material supplier whom you have never met has filed a Mechanics’ Lien against your property! As a result, your home, rental property, or commercial building is now in danger of being foreclosed upon to pay this subcontractor or supplier even though you paid your contractor in full.
Key Article Highlights
- Mechanics liens are used by contractors to put liens against your home for unpaid debts – even if you do not think that the works were done satisfactorily and even if you paid the general contractor
- Colorado has defenses to improperly filed mechanics liens
- You cannot sell or refinance your home without dealing with a mechanics lien
- If a lien is filed, the contractor may initiate a foreclosure of your house
What is a Mechanics’ Lien
A Mechanics’ Lien is a legal claim of a labor provider or a material provider demanding to be paid for materials or labor which was provided to improve or repair the property. The law allows that if a subcontractor or material provider is not paid then he or she may foreclose upon the property to which he or she provided supplies or labor and sell the property to pay the debt, even if the property owner paid the primary contractor who failed to pay the subcontractor and/or supplier. Thus when a creditor is owed a few thousand dollars he may record a Mechanics’ Lien against real property which may have a value of hundreds of thousands of dollars. You can see the leverage he has in collecting this debt! This is a great tool for mechanics, tradesmen, subcontractors, labor providers, and material providers. But it must be used properly or the Mechanics’ Lien may be found invalid and thus unenforceable.
The bottom line is that Colorado law protects mechanics, tradesmen, labor providers, and material suppliers; and a property owner may be forced to pay for these services or supplies twice. If the property owner refuses to pay the debt the lien holder, i.e. the supplier may foreclose upon the property, just like a lender, to recover the amount owed.
How a Mechanics’ Lien Works
Suppliers, who have contributed labor or materials to improving or repairing property, even if the supplier did not contract directly with the property owner, have a right to be paid for that contribution. This right is derived from the concept of unjust enrichment that is the property owner would be unjustly enriched by not being forced to pay for the supplies which increased the value of his or her property. In order to enforce this right to be paid the supplier may undertake the legal process of perfecting and enforcing his or her Mechanics’ Lien.
A Mechanics’ Lien is a very powerful tool to force payment for the supply of labor or materials used to improve a property. However, the supplier has a very short window of opportunity to perfect his or her claim. The Mechanics’ Lien statute only allows, at most, four (4) months from the completion of the improvement project for the lien to be perfected and recorded.
However, before the Mechanics’ Lien may be recorded the suppliers must provide the property owner notice and an opportunity to cure. This notice is generally referred to as a Notice of Intent to File a Lien Statement. The notice must be served upon the property owner at least ten (10) days before the Mechanics’ Lien is recorded.
Once the lien is recorded it is valid only for a maximum of six months (6), with a few specific exceptions. This time limit is strictly enforced because this is such a powerful tool. The strict enforcement of this time limit has saved many property owners from the harsh realities of suppliers demanding payment by asserting their rights under the Mechanics’ Lien statute.
What to Do If a Mechanics’ Lien is Recorded Against Your Property
The first and best action you can take when a Mechanics’ Lien is filed against you, or you receive a Notice of Intent to File a Lien statement, is to contact a knowledgeable real estate attorney in your area. If you live in Castle Rock, Douglas County, Centennial, Highlands Ranch, or anywhere else in the south metro Denver region, the attorneys at Robinson & Henry can help.
Your attorney will determine the validity of the Mechanics’ Lien and your best course of action in fighting it. Perhaps the work is not yet finished or materials were not actually delivered to your property or were not part of the plans or contracts you signed. Maybe the supplier signed a lien waiver limiting or prohibiting his ability to record a Mechanics’ Lien on the property. In addition, contractors and suppliers often fail to meet the strictly enforced timelines required to file a valid Mechanics’ Lien, thus invalidating their demands. The lien may be found to be excessive or spurious. Or, you may qualify for the affirmative defense offered to homeowners who reside in a single-family home upon which the supplier is attempting to enforce a Mechanics’ Lien.
Additionally, your lawyer will examine the lien to ensure it contains the statutorily required information. For instance, does the lien statement clearly list:
- The name of the property owner;
- the name of the creditor;
- the name of the person or entity who furnished the labor or materials;
- the name of the primary contractor, when the lien is claimed by a subcontractor;
- the address or a description of the property where the work was performed;
- the amount owed; and is
- the claim signed by the claimant?
If not, the Mechanics’ Lien may be found invalid.
If the claimant has begun a foreclosure lawsuit to force the sale of the property in order to be paid then the lawsuit must have been initiated during the valid period of the lien.
Once the lien expires, is settled, or is determined to be invalid you will need to take action to have it removed. Until it is removed it will be virtually impossible for you to sell, refinance or even establish a line of credit for your property.
If you find yourself mired in the technicalities of a Mechanics’ Lien on your property contact the Mechanics’ Lien professionals at Robinson & Henry. Call 303-688-0944 for a free consultation or schedule your appointment online.