3 Parts to Mechanics Liens in Colorado
A Mechanic’s Lien in Colorado has 3 significant phases. First, notice of the lien must be given. Second, the actual lien document must be recorded with the clerk and recorder of the county where the property to be liened is located. Finally, the lien must be enforced.
NOTICE OF INTENT TO LIEN - THE PROCEDUREIt's common sense that a party seeking to enforce a lien must give notice prior to encumbering a property. Often, simple communication can resolve an issue before it gives rise to legal action. Many times in lien issues a property owner is a simple bystander to an issue between a contractor and a subcontractor. Take for instance a standard job. An owner purchased a building that needed remodeling before being rented and starting to make money for the owner. In order to effectuate this, the owner hires a general contractor to manage the repairs. The general contractor doesn't have sufficient resources to personally complete the remodel, and so the general contractor decides to subcontract out various portions of the work. At some point in time, a dispute between the general contractor and the subcontractor arises. Perhaps the subcontractor performs, but the general contractor does not have the funds to pay the subcontractor, or perhaps the subcontractor doesn't like the payment standards of the general contractor and wants to get paid immediately rather than waiting for project completion. In order to effectuate payment, the subcontractor threatens to place a lien on the job. The owner may be unaware of the pending lien and, through no fault of the owners, the job may be encumbered and subject to foreclosure.
In order to ensure that everyone has notice of the situation, the Colorado Legislature mandated that each person seeking to place a lien on a piece of property must provide a "Notice of Intent to File Lien Statement" at least 10 days prior to the recording of the Statement of Lien. This Notice of Intent to File Lien Statement must be served via certified mail, return receipt requested, and an affidavit swearing that the Notice of Intent to File Lien Statement was sent must be recorded alongside the Statement of Lien. A failure to give at least 10 day's notice, or a failure to send via certified mail, return receipt requested, may render the entire lien invalid.
STATEMENT OF LIEN - THE ENCUMBRANCEOnce adequate notice of the pending Mechanic's lien has been given, a lien claimant must record a Statement of Lien with the clerk and recorder of the county where the property to be liened is located. This Statement of Lien must also meet statutory prerequisites as well. In general, a Lien requires the following items:
a. The name of the owner
b. The name of the person claiming the lien
c. The name of the general contractor (if there is one)
d. A description of the property
e. A statement of the amount owed
f. An affidavit of mailing of the Notice of Intent to File Lien Statement
As with the Notice phase, there are strict timelines for the filing of the Statement of lien. As a general rule of thumb, for the "standard" mechanic's lien, the Statement of Lien must be recorded not later than four months from the date that the lien claimant last did work on the job. If the Statement of Lien is recorded even one day late, it could render the entire lien invalid. Even relying on this "standard" Mechanic's Lien timeline, it is important to note that there are numerous exceptions to this general rule. Various special rules can accelerate this timeline to as early as two months from the date the lien claimant last did work on the job, could extend the timeline to three months after the completion of the whole job, or could extend an additional six months. These varying timelines are very complex and should be closely evaluated when determining when a lien must be filed.
FORECLOSURE OF A MECHANIC'S LIEN - THE ENFORCEMENTThe final portion of a mechanic's lien live cycle comes with the enforcement. Like most liens, the Mechanic's Lien gives the lien claimant the right to foreclose on the property encumbered by the Lien. In order to foreclose on a mechanic's lien, a lien claimant must begin foreclosure proceedings within six months from the date of completion of the job. If the lawsuit is filed even one day too late, it is likely an invalid foreclosure attempt and the lien will be released.
In all litigation on a Mechanic's Lien, the claimant must name each and every party with an interest in the Property. The owner, the claimant, and the general contractor (if there is one) are always named, but often there are banks, other contractors, and many other parties involved in the case. Significant time in litigation is often given to the determination of how much is owed on a Mechanic's Lien, and if the bank, the owner, the general contractor, or the lien claimant is paid first, and if so, how much must be paid.