Chapter 2 - § 2.4 AMOUNT OF THE LIEN
| Jurisdiction | Colorado |
An individual who has supplied materials or labor for a private construction project may claim a lien for the "value" of such materials or labor. This value is usually determined by the contract price. A prime contractor's lien will always be limited to the contract price.65 A subcontractor's or supplier's lien, however, can be for the "value" of such materials or labor if neither the prime contract nor a proper memorandum thereof is recorded.66 The "value of labor" may also include any payments required under the terms of the construction or labor contract for pension, profit-sharing, vacation, health and welfare, prepaid legal services, or apprentice training benefits for the employees of any contractor. 67
§ 2.4.1—Amounts for Work Not Yet Performed
One cannot file the lien statement before the debt accrues. In Sperry & Mock, Inc. v. Security Savings & Loan Ass'n,68 the lienor filed a lien before having completed the entire project, but recorded the lien for the full amount that would eventually become due once all of the work was completed. The lienor did later complete the work. Technically, the lien should not have included amounts that would later become due in the future only after the work was completed.
A prime requisite to the establishment of a valid lien is that an indebtedness exists in favor of the claimant for labor or materials. . . . Here there would be no debt until the materials had been furnished or labor performed and the fact that the materials were later furnished and labor was later performed would not validate a lien claim that had been prematurely filed when no debt existed.69
But the overstatement did not result in the lien being invalidated. Instead, the court of appeals held that the lien claim would be limited to the amount due at the time the lien was recorded.70
§ 2.4.2—Excessive Liens
One cannot file a mechanics' lien for a sum in excess of what is actually due to the claimant. This prohibition is stated both in the statute and in case law.71 Specifically, filing a mechanics' lien for an excessive amount can result in forfeiture of the entire lien claim, even that part that is genuine, and also can result in the awarding of attorney fees and costs to the aggrieved party.72 But neither an obviously overstated mechanics' lien nor a completely improper mechanics' lien can be deemed a "spurious lien" under Colorado's spurious liens and documents statute.73 What this means is that property owners cannot obtain expedited relief if they wish to clear their property of mechanics' liens that are recorded in bad faith, other than to bond over the liens or seek injunctive relief.74 But recording a mechanics' lien where no such right exists can subject the party recording the improper lien to criminal action.75
Colorado has two statutes that penalize a claimant for recording an excessive lien, and the two statutes contain different standards. Section 38-22-123 applies if there is intent to cheat or defraud:
[I]f any person files either of said statements for a lien for a larger sum than is due or to become due, in fact, or in probability, as the case may be, with intent to cheat or defraud any other person, and that fact appears in any proceeding under this article, such person shall forfeit all rights to such lien under this article.76
Section 38-22-128 applies if there is knowledge by the claimant that the amount claimed is greater than the amount then due:
Any person who files a lien under this article for an amount greater than is due without a reasonable possibility that said amount claimed is due and with the knowledge that said amount claimed is greater than that amount then due, and that fact is shown in any proceeding under this article, shall forfeit all rights to such lien plus such person shall be liable to the person against whom the lien was filed in an amount equal to the costs and all attorney's fees.77
These two sections clearly cover the same territory, but require different standards. Reading them together, the Colorado Court of Appeals ruled that, for a mechanics' lien to be deemed excessive, there must be knowledge and intent to cheat or defraud. 78 In affirming, however, the Colorado Supreme Court disagreed with the court of appeals' approach, and in a footnote stated that the "knowledge by the claimant" standard is controlling:
[T]he statutes appear to be facially irreconcilable, requiring wholly different and conflicting standards for proving that a forfeiture of lien rights has occurred. On that basis, the statute enacted later in time, section 38-22-128, would prevail to the extent of the inconsistency.79
Thus, to prove that a lien is excessive and therefore forfeited, the focus should be on whether the lien was for an amount greater than is due without a reasonable possibility that said amount claimed is due and with the knowledge that said amount claimed is greater than that amount then due. Because of the timing of the Colorado Supreme Court decision adopting the standard in C.R.S. § 38-22-128, cases decided before 1985 might apply a different standard that is no longer applicable.
In addition to invalidating a lien, filing an excessive lien can result in an award of attorney fees against the lien claimant.80 In JW Construction Co. v. Elliot,81 however, the Colorado Court of Appeals held that a general contractor's president cannot be held personally liable when the corporation records a knowingly excessive mechanics' lien. This is so even though the corporation fabricated or altered invoices and the president "had participated in the misrepresentations and concealment."82
§ 2.4.3—Interest and Late Charges
Interest on the amount owed, based upon the rate agreed to by the claimant and the entity with which the claimant contracted, may be recovered and included in the lien statement. If no specific rate has been agreed to, then the statute provides for default interest at the rate of 12 percent per annum.83
In Honnen Equipment Co. v. Never Summer Backhoe Service, Inc.,84 a division of the Colorado Court of Appeals held that the inclusion of interest in a lien statement does not render the lien void as an excessive lien. In so holding, the court had to distinguish prior Colorado Supreme Court precedent holding that a mechanics' lien may not include late charges. In Honnen Equipment Co., the lien claimant included accrued interest in its mechanics' lien statement itself. The owner argued that interest may not be included in a lien because interest does not represent the value of the work performed to benefit the property. Therefore, according to the owner, the inclusion of accrued interest in a lien statement renders it excessive and therefore invalid pursuant to C.R.S. § 38-22-128. The court of...
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