Chapter 7 - § 7.2 • DISBURSER OBLIGATION AND REMEDIES|NOTICE TO DISBURSER: C.R.S. § 38-22-126

• Jurisdiction: Colorado

§ 7.2 • DISBURSER OBLIGATION AND REMEDIES/NOTICE TO DISBURSER: C.R.S. § 38-22-126

Any party responsible for disbursing funds to pay the cost of any construction, alteration, or repair has a duty to record, in the office of the county clerk and recorder of the county where the property is located, a notice referred to as a "disburser's notice." This notice must include the following information:

1) Name and address of the owner of the property;
2) Names, addresses, and telephone numbers of the principal contractor and the disburser himself or herself; and
3) The legal description of the land and its address, if any.

The notice will be indexed by the clerk and recorder under the name of the owner and each principal contractor.⁵

Although not strictly a mechanics' lien remedy, Colorado law then provides that persons entitled to mechanics' liens may have claims against disbursers of monies to be used for construction.⁶ Disbursers are required to record a disburser's notice upon undertaking to disburse construction funds, although this is not always done in practice. One entitled to a mechanics' lien may serve a notice to disburser and, if properly accomplished, the disburser may be liable to the person giving notice if the disburser advances funds after receipt of the notice. Any person or entity entitled to a mechanics' lien may serve on a disburser a notice. The notice to the disburser must include the following information:

1) The address or legal description of the property;
2) The claimant's name, address, and phone number;
3) The name of the person contracted with; and
4) A general statement of the contract (labor or materials to be furnished and the contract price).⁷

If a disburser receives such notice, then the disburser, prior to disbursing any contract funds, must ascertain the amount due the claimant on any disbursement date, and "pay such amount directly to the claimant out of any undisbursed funds available for and due to said person designated in said notice on such date . . . ."⁸ If there is a dispute concerning the claimant's entitlement to payment, then the disburser may impound the funds until the dispute is settled by agreement or a final judicial determination.⁹

If the disburser fails to comply with its duty to either pay the claimant directly or to impound the requested funds, then the disburser can be held personally liable to the claimant for the amount that the disburser should have paid to the claimant.¹⁰ Failure on the part of the...