Chapter 19 - § 19.8 • HOMEOWNER DEFENSES

• Jurisdiction: Colorado

§ 19.8 • HOMEOWNER DEFENSES

Colorado has a specific statutory exception to mechanics' liens applicable to single-family dwelling units. Under this exception, it is a complete defense to the enforcement of any mechanics' lien if the owner has paid its principal contractor in full.²⁶³

In Crissey Fowler Lumber Co. v. First Community Industrial Bank,²⁶⁴ a division of the Colorado Court of Appeals interpreted this statute to require the full payment to be made before any liens are recorded. In Crissey, the first general contractor walked off the project, and liens were filed before the homeowner paid the full contract price. According to the court:

Here, as noted, defendants' original contractor abandoned the project midway without paying plaintiffs either in part or in full. At that point, defendants had paid the contractor $130,000 of the $146,500 purchase price. Thus, because they had to hire a second general contractor and new subcontractors, eventually defendants paid the original purchase price, and more, for their home. Accordingly, defendants contend, they satisfied the statutory requirement of paying "the initial purchase price or contract amount plus any additions or change orders."

Rejecting this argument, however, the trial court concluded that, because they knew of plaintiffs' liens prior to completing payment, the Taylors were in a different position from that of a homeowner who does not learn of any mechanics' liens until after full payment. The court reasoned that under the plain language of § 38-22-102(3.5), defendants could not assert the homeowner's defense because they had not paid "the initial purchase price" prior to plaintiffs' liens being recorded. We agree with that interpretation.²⁶⁵

In addition to the homeowner defense, the Colorado legislature has sought to provide additional protection to bona fide purchasers of single-family homes by providing an additional defense based on the timing of the recording of a mechanics' lien. Specifically:

No lien, excepting those claimed by laborers or mechanics [working by the day or piece, but without furnishing material therefor, either as principal or subcontractors], filed for record more than two months after completion of the building, improvement, or structure shall encumber the interest of any bona fide purchaser for value of real property, the principal improvement upon which is a single- or double-family dwelling, unless said purchaser at the time of conveyance has actual knowledge

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