Colorado's Mechanics' Lien Law
| Publication year | 1979 |
| Pages | 194 |
1979, February, Pg. 194. Colorado's Mechanics' Lien Law
Gregory F. Palcanis is Vice President and General Counsel for the Denver-based Security Pacific Mortgage Corporation.
Since its enactment in 1893, Colorado's Mechanics' Lien Statute(fn1) has undergone numerous amendments and has been the subject of a large body of case law. Proper representation of clients requires familiarity with this material on a current basis. This article discusses the basic provisions of the Colorado Mechanics' Lien Statute and associated case law. It also provides information needed to advise the client on the procedures involved to perfect the mechanics' lien and if necessary, proceed to litigation and execution on the judgment. The attached appendix contains a list of forms that can be purchased as well as six forms which can be used for litigating the lien claim.
The Colorado Mechanics' Lien Statute is designed to aid those who add value to real property,(fn2) thereby preventing the unjust enrichment of the owner.(fn3) The law provides a lien to those who perform labor, render services or furnish materials(fn4) to property other than public property.(fn5) In order to benefit all who add value, the statute was amended to include architects, engineers, draftsmen, artisans, and trustees under trusts established for the benefit of the contractors' employees.(fn6) The statute allows a direct lien(fn7) against the property on which work is or is to be performed and the lien must be founded upon a direct or indirect contract with the property owner or his agent.(fn8) (Case interpretations for determining who the owner may be in order to support the lien are discussed below.) The foreclosure of the lien is equitable in nature and is an action in rem.(fn9)
In determining whether a claimant has perfected his lien properly, the courts strictly construe the statute. This places the burden on the claimant or his lawyer to follow properly the statutory requirements concerning notifications, completion and recording of the lien statement, and commencing suit to foreclose the lien.
This also makes it imperative for counsel to realize that he or she can get no more for the client than what is allowed by the statute. For example, the statute will allow a lien only upon the property to which the lien claimant bestowed labor services or material, and the amount of the lien claim will be limited to the value of the labor, services, or material incorporated
The statute sets forth those items which are lienable.(fn11) However, the circumstances surrounding the furnishing of the lienable items will control whether the lien is or is not valid. To be lienable, the work, services or materials must be supplied for the structure for the lien to attach to the property.(fn12) For instance, the architect who draws plans for a developer with no particular piece of property in mind would have difficulty in claiming a lien against the property on which his plans were ultimately used since he did not draw them to benefit that particular piece of property. Although it is not required that all work be done at the job site to be lienable,(fn13) the item for which the lien is claimed must be done specifically for incorporation into the job. The possibility of it being traceable to more than one project could be fatal to the lien.(fn14)
In C & W Electric, it was made clear that lien claimants who do work or supply materials to modular units should be careful to keep records that will trace their work or materials to a specific unit. The claimant must then establish to what piece of property the unit will be delivered and that the owner of that property has contracted to have the work done or materials supplied. Failure to prove these points is fatal to the lien claim.
To preserve the lien, a notice of intent to file the lien must be served upon the owner or reputed owner of the property or his agent and the prime contractor or his agent at least ten days before the time of filing the lien statement.(fn15) Service must be by personal service or registered or certified mail, return receipt requested, addressed to the last known address of such persons, and an affidavit of such service or mailing must be filed with the clerk and recorder with the lien statement. This constitutes proof of service when so filed.
The content of the lien statement is governed by statute.(fn16) However, court decisions interpreting the terms used in the statute must be considered when completing it. The name of the owner or reputed owner of the property to be liened is required but if this fact is not known, a statement to this effect will suffice.(fn17) The name of the lien claimant and the name of the contractor when a subcontractor or assignee is filing the statement is required. If the contractor is not known, a statement to this effect is acceptable. A mistake in describing the lien claimant as a general contractor or subcontractor is not fatal to the lien.(fn18) If the claimant has a contract with the owner, he is a principal contractor and should list himself as such.
The property must be described adequately so that a party familiar with the locality can identify the premises.(fn19) Failure to describe the property adequately is fatal and, for this reason, it is advisable to state the property's street address, if known.(fn20) Because the property description is so important, it is advisable for the lien claimant to obtain this address or at least to verify what counsel intends to use. Sources that can be used to obtain the address include the construction lender's legal description, tax records and building permits.
Moreover, the amount claimed must be stated and, although a discrepancy may exist between what is claimed and what is proved in trial,(fn21) intentionally overstating the amount of the claim can be fatal and can make the claimant liable for the owner's costs and attorney's
The mechanics' lien law provides that a person entitled to a lien for the construction of two or more structures, when constructed for the same person under the same contract, may apportion the value of the work done or materials supplied between the various structures and enforce his lien as apportioned.(fn25) If the claimant cannot apportion his lien, he must file a blanket lien.(fn26) The blanket lien is useful in situations where labor or materials are supplied to condominiums or multiple building sites since it is virtually impossible to determine which toilet or electrical fixture has been placed in a particular unit or structure and for which item payment has been made.
Lien statements for laborers by the day or piece must be recorded with the clerk and recorder of the county in which the real property is located. This must be done after the last work was performed and at any time within two months after completion of the improvement.(fn27) All other lien claimants must record their liens within four months after the day on which the last labor was performed or the last material was furnished by the lien claimant.(fn28) Failure to record in the proper county is fatal to the lien.(fn29) These time periods may be extended to four months after completion of the improvement by the lien claimant filing a notice of intent to claim a lien in accordance with the statute.(fn30) The filing of this notice by one claimant extends the lien filing period for all who may eventually file a claim. Filing of a lien statement prior to the existence of a debt invalidates the lien.(fn31)
A further provision in the statute(fn32) limits liens which can affect the interest of a bona fide purchaser of a single or double family dwelling. This section necessitates the early filing of the lien statement or notice so that the statement or notice will be of record prior to the conveyance of the property to the bona fide purchaser. It should be noted that in the new housing developments it is not uncommon for conveyance and occupancy to take place before all work is completed. Thus, it is advisable to file as early as possible. Unless the lien claimant can demonstrate his compliance with this section of the statute no lien will be valid against the bona fide purchaser
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