Fight the Lien on Your Home
It can be unnerving to discover you have a lien on your house. The good news is, there are ways to fight a lien on your home.
This article explores what to do next if you discover a mechanic’s lien on your home.
A mechanic’s lien means that your contractor is preparing to foreclose on your home. You need to hire a good real estate litigator to challenge a mechanic’s lien on your property.
When Things Don’t Go As Planned
Unfortunately, when a promising home renovation project turns sour, your dream home can quickly become a nightmare.
This scenario happens all the time:
A homeowner blames their contractor for the project’s problems and refuses payment. The contractor blames the homeowner for the mess. So, the contractor turns around and slaps a lawsuit against the house called a mechanic’s lien.
A mechanic’s lien is a legal claim on a home or other real estate. Anyone who supplies labor or materials for a project can file a mechanic’s lien. This includes general contractors, subcontractors, and suppliers.
If a mechanic’s lien is properly utilized, a contractor can force your home into foreclosure to get paid.
First and foremost, you need to hire an attorney to help you fight against the contractor who filed a lien on your property. That attorney can help you find out what kind of lien you are dealing with. There are a couple of different ways you can figure this out.
Most people find out they have a lien on their property when they want to sell or refinance it. However, there are other ways to find out without putting your house on the market or going to the bank.
You can order what is called an owner’s and encumbrances report, or O and E report. This report comes from a title company. In this report, you’ll receive a copy of the lien so you can figure out exactly what kind it is.
Does a Contractor Have to Notify Me Before Filing a Mechanic’s Lien?
It depends. If the project is still pending, a contractor is not legally required to submit a preliminary lien notice.
If the project is complete, a contractor must provide a notice of intent to file a lien—along with an affidavit of service—10 days before officially filing the lien. Colo. Rev. Stat. § 38-22-109
How Long Does a Contractor Have to File a Mechanic’s Lien?
In Colorado, a contractor must file a mechanic’s lien four months after the day they last worked on, or furnished materials for, the project. C.R.S. § 38-22-109(5)
If the amount listed on the lien is not paid within six months after the last labor was performed or materials were furnished, the subcontractor must file a motion to enforce the lien. To do so, they must file notice of enforcement with the county clerk and recorder. C.R.S. § 38-22-110
If the subcontractor does not file an action to foreclose on your property within the six-month period, the lien expires. Schlosky v. Mobile Premix Concrete, Inc., 656 P.2d 1321, 1322 (Colo. App. 1982)
What if I Paid Everything?
Colorado law protects homeowners from mechanic’s liens if they have paid the general contractor. C.R.S. § 38-22-102
If you can prove you paid the general contractor, and the general contractor then failed to pay the subcontractors, the subcontractors cannot enforce a mechanic’s lien against your property.
A Colorado Case
In December 1989, Michael and Cynthia Brown hired a contractor to build a home on their El Paso County property. When construction began, the couple gave the builder, Brent Gibson Homes, Inc., a $27,500 down payment. The Browns paid the remaining balance in June 1990, when the builders officially transferred the property’s title to them.
Subcontractor Files Lien
Before transferring the title to the Browns, the builders had not fully paid the subcontractors who installed the plumbing. The subcontractors filed a mechanic’s lien against the Brown home in an attempt to collect their money.
An El Paso County court dismissed the subcontractor’s action to foreclose on the Browns’ home.
The subcontractor appealed, claiming that C.R.S. § 38-22-102 did not apply because the builders were still a partial owner of the home—rather than a contractor—when the Browns paid them. Therefore, the subcontractor could enforce the lien “because payment was not made by the owner ‘to the principal contractor or any subcontractor.’” Koch Plumbing & Heating, Inc. v. Brown, 835 P.2d 610, 612 (Colo. App. 1992)
However, a Colorado Court of Appeals upheld the trial court’s decision:
Accordingly, regardless of Gibson’s status as an owner, when the Browns paid Gibson various amounts over time, constituting the full purchase price for their home, the payment was made to Gibson as contractor, by necessity either principal contractor or subcontractor, and the statute’s provisions were automatically triggered to protect the Browns, as homeowners, from subsequent liens against their residence. Koch Plumbing & Heating, Inc. v. Brown, 835 P.2d 610, 612-13 (Colo. App. 1992)
What to Do About a Mechanic’s Lien
A mechanic’s lien is a powerful tool in the hands of a contractor. However, a contractor must follow Colorado’s mechanic’s lien laws to the letter—including their legal duty to inform you about the lien within a certain timeframe.
If a contractor has placed a mechanic’s lien on your property, you have several options.
Wait It Out
If you are not in a rush to have the lien removed, you can wait it out. In Colorado, a mechanic’s lien is only enforceable for up to six months after one of the following events:
- the last date work was performed,
- the last date materials were furnished; or
- the date the project was complete.
File a Surety Bond
If you cannot wait out the lien, you may want to file a surety bond with the district court where your property is located. The surety bond must be 1.5 times the value of the lien. C.R.S. § 38-22-131
A surety bond is a legally binding three-party contract meant to provide a financial guarantee that one party will fulfill its obligation to a second party. A neutral third party, typically an insurance company, guarantees that the first party will make good on its promise.
The district court will hold the surety bond and remove the lien. However, you will unfortunately not have access to the money until either the contractor forecloses on the surety bond or you can prove the lien is unenforceable.
File a Spurious Lien Claim
If you believe there is no basis for the lien at all, it may be considered a spurious lien. A spurious lien is an invalid or illegal lien.
You can file a spurious lien action in the district court where your property is located, and a judge will decide whether the lien on your property is valid or not.
Let Us Help You Fight a Lien
If you just found out you have a lien on your property, be it a mechanic’s lien or spurious lien, you are probably pretty upset. We understand. But our real estate attorneys also know these liens are almost always not the end of the world. Most situations in which a lien is involved are settled well before foreclosure comes into play.
An experienced real estate attorney can help you work it out. If you have more questions about a lien on your property, please do not hesitate to call us. We always offer a free case assessment. Call 303-688-0944. You can also click here to schedule.