HOW TO FILE A COLORADO MECHANICS LIEN (Colorado Mechanics Lien and Notice Requirement Overview)
Mechanics liens are a crucial component of the construction payment ecosystem, and a powerful tool to make sure construction companies get paid what they deserve. However, the requirements surrounding mechanics liens and notices are complex and confusing. This guide sets out and simplifies the rules
Who Can File?Colorado law allows a "person who furnishes or supplies laborers, machinery, tools, or equipment in the prosecution of the work, and mechanics, materialmen, contractors, subcontractors, builders, and all persons of every class performing labor upon or furnishing directly to the owner or persons furnishing labor, laborers, or materials to be used in construction, alteration, improvement, addition to, or repair, either in whole or in part of any building" to file a mechanics lien.
Architects, engineers, draftsmen and artisans are also allowed to file mechanics liens. Colorado law is extremely expansive in the parties it allows to file mechanics liens, even granting lien rights to personnel agencies who supply labor. Further, those who furnish specially fabricated materials may be entitled to file a mechanics lien even if the contract is cancelled pre-installation and the materials are never incorporated into the property.
According to Colorado law, there is no licensing requirement for a person otherwise entitled to a mechanics lien to assert those lien rights.
PRELIMINARY NOTICE TO OWNER (Notice of Intent)Colorado does not require any notice prior to performing work on the project. However, any party other than the prime contractor is allowed to file a Notice to Owner that has the effect of requiring the owner to withhold funds to ensure payment of the notifying party.
Notice to Owner may not be required, but a Colorado mechanics lien claimant is required to give the property owner a Notice of Intent to Lien as well as a copy of the Statement of Lien that will be filed at least 10 full days prior to the filing of the mechanics lien.
Notice of Intent to Lien
In order to preserve any lien for work performed or laborers or materials furnished, a notice of intent to file a lien statement must be sent.
Who Must Receive the Notice of Intent to Lien?
The owner or reputed owner of the property or the owner's agent and the principal or prime contractor (or his or her agent) must receive the Notice of Intent to Lien.
The Notice of Intent to Lien, along with a copy of the Statement of Lien to be filed, must be given to the owner at least 10 full days prior to the filing of the Statement of Lien. Failure to provide the Notice of Intent to Lien (and a copy of the Statement of Lien to be filed) at least 10 full days prior to the filing of the lien is fatal to the lien claim.
How to Send the Notice of Intent to Lien
A Notice Intent to Lien, may be given by personal service, or by registered or certified mail return receipt requested addressed to the last known address of such persons.
When is the Notice Effective
The Notice of Intent to Lien requirement is considered completed when it is: (1) Mailed, if served by mailing; or (2) Received, if served by personal service.
FILING A MECHANICS LIENContents of a Colorado Mechanics Lien
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, a statement containing:
The name of the owner, the name of the claimant, the name of the hiring party, a description of the property, and a statement of the amount owed the claimant.
The statement shall be signed and sworn to by the claimant to the best knowledge, information, and belief of the affiant. The signature of any such affiant to any such verification shall be a sufficient signing of the statement.
Deadline to File
For all lien claimants except laborers who don't provide any materials to the project, Colorado law requires that a Statement of Lien must be filed by no later than 4 months after the last day labor or materials were provided to the project - punch list items and remedial work do not count to extend the time period.
For laborers who did not provide materials to the project, the lien must be filed after the last labor was performed and within 2 months of that date.
For a one or two family home, the normal 4-month period in which a mechanics lien may be filed is shortened to 2 months if there is a bona fide purchaser of the dwelling.
The time to file a lien may be extended if a Notice of Extension of Time to File Lien is filed with the county clerk and recorded in the county where the property is located. This extends the time in which a mechanics lien can be filed to either 4 months after the project is completed, or 6 months after filing the extension of time - whichever occurs first. This extension is likely not available on one or two family residential projects.
Colorado mechanics lien law lien claimants must be very careful to include the right amount the claimant is owed in the mechanics lien itself. This amount should only exceed the contract price in extremely limited circumstances. If a Colorado court concludes that this amount exceeds the contract price, that there was no reasonable explanation for the exaggeration, and that the exaggeration was intentional, the court will declare the entire lien invalid.
Deadline to Enforce Lien
Colorado law requires that a mechanics lien be enforced within 6 months of the date the project was completed, or labor or materials were last furnished to the project.
A Colorado mechanics lien requires a description of the property "sufficient to identify same." This does not require a legal description of the property. A description is sufficient if it describes the property to be liened such that it can be reasonably identified.
A mechanics lien in Colorado must be notarized to be valid.
CONCLUSIONA mechanics lien can be a powerful tool to get paid on construction projects. But, the efficacy of the tool is dependent on the lien being valid. Following the necessary notice requirements and procedures from the beginning of the project, and following the lien filing rules in order to make sure the lien is valid greatly increase a lien's ability to result in payment.
A potential lien claimant should make sure to give careful attention to the requirements if filing themselves, utilize software products to manage lien rights as an intermediate step, or obtain assistance from attorneys if they need legal guidance or assistance.