The Power of a Mechanic’s Lien
Colorado contractors own lots of tools, but perhaps the most powerful one at their disposal is not found on his or her tool belt. Nope, this tool is a legal power tool. It’s the mechanic’s lien. This article covers how to file a mechanic’s lien in Colorado.
A mechanic’s lien protects contractors from homeowners who refuse to pay for the work that’s been done to their property, such as a remodeling project or a home repair.
Understanding the mechanic’s lien process can protect you, the contractor, from losing lots of money down the line. When a mechanic’s lien is activated correctly, this powerful tool can help you get paid.
Get Priority When You File a Mechanic’s Lien
When you file a mechanic’s lien, you are essentially placing a legal debt against your client’s property if they fail to pay for all or part of your work.
In fact, the mechanic’s lien is so powerful that it can actually force the sale of a home so you to can collect the money you’re owed. It’s also a way to file a legal claim against the property.
When you file a mechanic’s lien, you become a priority creditor. That means you go to the front of the line if the homeowner’s house is sold.
Filing Rules are Strict
These liens can actually force a home into foreclosure, causing someone to lose their home. For that reason, the courts require a contractor to follow very strict rules within a specific time frame.
If You File Without an Attorney…
You’re pretty much on your own. Don’t expect anyone at county offices to hold your hand through the process.
Also, the court will expect you to adhere to the rigid timetables regardless of your expertise in mechanic’s liens.
That’s why it’s important to know exactly what documents you need to file, when you need to file them, and where they need to be filed.
First: Give Proper Notice
You cannot just go out and file a mechanic’s lien without giving the homeowner some warning first.
The property owner must receive a Notice of Intent to File a Lien Statement.
The Notice of Intent to Lien, often simply referred to as an NOI, basically lets the homeowner know that if they do not pay you, they can expect you to file a lien against their property.
When You Should Send the NOI
The homeowner should get the NOI at least ten days before you file a mechanic’s lien. Why? First, it’s state law, and second, the homeowner has the right to rectify the unpaid balance before a lien is placed against their home.
Proof You Sent the NOI
State law says an NOI must be served by personal service or registered or certified mail with a return receipt request.
Additionally, you must include an affidavit that you sent the NOI through either a service or the mail with your lien statement when you file it with the county.
Such notice of intent shall be served by personal service or by registered or certified mail, return receipt requested, addressed to the last known address of such persons, and an affidavit of such service or mailing at least ten days before filing of the lien statement with the county clerk and recorder shall be filed for record with said statement and shall constitute proof of such service. C.R.S.A. § 38-22-109(3)
If the homeowner does not settle the debt with you, it’s time to officially file your lien.
Let’s take a look at what you need to include in the lien statement, as well as other pertinent information like deadlines.
Second: Include Correct Information
There are certain pieces of information you must include in your lien statement.
State law requires the following:
- Property owner(s) name(s)
- Name of the individual filing the lien
- Address of the property where the work took place
- How much the property owner(s) owes
- Lien filer’s legal signature
- Affidavit that lien filer served property owner with Notice of Intent to Lien
Name of Individual Filing the Lien
This can get a little tricky depending on who is claiming the lien and what their role was on the job. Here’s what state law says about which worker’s name should appear on the lien based on their job title:
The name of the person claiming the lien, the name of the person who furnished the laborers or materials or performed the labor for which the lien is claimed, and the name of the contractor when the lien is claimed by a subcontractor or by the assignee of a subcontractor, or, in case the name of such contractor is not known to a lien claimant, a statement to that effect; C.R.S.A. § 38-22-109(1)(b)
Do Not Overstate How Much You’re Owed
It’s easy to be irritated when you are not being paid for your work. However, do not let your frustration cause you to do something rash like overstate how much your client owes you.
If you knowingly file an excessive lien, you forfeit your rights to the lien. You could also be liable for everyone’s court costs and attorney fees.
Don’t Exaggerate Debt: A Cautionary Tale
In a 1984 case, a general contractor was removed from a project after only performing some preliminary work. The job was expected to cost $1.7 million. The contractor subsequently filed a lien for the full project price. He later amended the lien, stating he was only owed $44,000, but the court was not impressed with the change.
The court ruled the contractor had filed the original lien for an amount that exceeded what was actually due without a reasonable probability that the amount was really due.
The result? The court ordered the lien to be forfeited, and the contractor was held responsible for the owner’s costs and attorney’s fees.
— Heating and Plumbing Engineers, Inc. v. H.J. Wilson Co., Inc., Colo. Court of Appeals, Div. II
Third: Know the Filing Deadlines
The deadline to file a mechanic’s lien depends on what your role was on the job.
If you’re a contractor, materials supplier, or subcontractor and you intend to file a lien on a client’s property, you must do it within four months of your last work. C.R.S.A. § 38-22-109
Laborers on a project have less time to file a lien. If that’s you, be sure to submit a lien within two months of the work being completed.
Fourth: Where to Submit the Lien
Mechanic’s liens are required to be filed at the clerk and recorder office in the county where the property is located.
Any person wishing to use the provisions of this article shall file for record, in the office of the county clerk and recorder of the county wherein the property, or the principal part thereof, to be affected by the lien is situated, C.R.S.A. § 38-22-109(1)
After the Lien is Recorded
Once you file a mechanic’s lien with the court, it’s valid only for six months.
If You Get Paid After the Lien is Recorded
If the property owner pays you after you filed the lien, you must release the lien from the property. To do this, you will submit a request with the same county clerk and recorder office where the original lien was filed.
…the certificate of release shall show that the property has been forever released from the lien, from any notice of lis pendens or notice of the commencement of any action relating to such lien, and from any action brought to foreclose such lien. – C.R.S.A. § 38-22-132
If the lien is not released after you get paid, you could be held liable for legal expenses incurred by the property owners. You’ll also be paying the property owners, according to state law:
…pay to such person the sum of ten dollars per day for every day of such neglect or refusal, to be recovered in the same manner as other debts – C.R.S.A. § 38-22-118
Enforcing the Lien if You Do Not Get Paid
If you do not get paid after having recorded the lien statement, you’ll have to have the lien enforced to begin the process to get paid. That involves filing a lawsuit.
You must give the homeowners notice that you are filing a lawsuit against their property. This is called a notice of lis pendens.
The mechanic’s lien that you filed remains valid for the duration of the lawsuit.
If You Win the Lawsuit
If you are victorious in your lawsuit, a judge can order the property to be foreclosed and sold, generally, through a sheriff’s auction.
Make Sure You Get it Right
The mechanic’s lien is a very powerful tool that is strictly enforced by the courts. As you can see, it’s quite a process for the execution of a lien to be successful.
Our attorneys can help you through the process to file a mechanic’s lien from start to finish – or anywhere along the way. We know how to negotiate settlements. We have experienced litigators who can represent you in court should that become necessary.
Always a Free Initial Assessment
If you have questions about how to file a mechanic’s lien, call 303-688-0944 today to set up a meeting. You can also schedule the appointment online when you click here.