Chapter 9 - § 9.1 PRINCIPAL CONTRACTOR BONDS POSTED PRIOR TO COMMENCEMENT OF WORK

• Jurisdiction: Colorado

§ 9.1 PRINCIPAL CONTRACTOR BONDS POSTED PRIOR TO COMMENCEMENT OF WORK

The right to a lien does not apply if prior to commencement of work on a construction project the principal contractor procures a performance bond and a labor and materials payment bond, each in an amount equal to 150 percent of the contract price. The bonds must be executed by the principal contractor and one or more corporate sureties qualified to do business in Colorado.¹ A notice of such bond must be filed with the county clerk and recorder of the county where the project is located prior to the commencement of any work on the project. As described in C.R.S. § 38-22-129(3), the notice must be indexed according to both the street address and the legal description of the property. The principal contractor must post a notice on the project property stating the bond has been filed. The contractor must also make copies of the bond available to any subcontractors, materialmen, or laborers upon request.²

The statute is silent as to the effect of the bonds on mechanics' liens if the notice of the bond is filed of record after commencement of work on the project. Presumably, the argument would then be that the bond notice filing did not comply with the statute, and mechanics' lien procedures would remain the viable remedy. C.R.S. § 38-22-129(3) does provide that "[i]n order to be effective, a notice of such bond shall be filed . . . prior to the commencement of any work . . . ."

Although C.R.S. § 38-22-129(3) speaks about a bond in the singular, the fact is that C.R.S. § 38-22-129(1) requires the posting of two bonds, one a performance bond and the other a labor and materials payment bond, each in an amount equal to 150 percent of the contract price.

§ 9.1.1—Bond Claim Procedure

In accordance with C.R.S. § 38-22-129(2), all subcontractors, materialmen, mechanics, and others who would otherwise be entitled to proceed with a mechanics' lien and subsequent foreclosure action have a right of action directly against the principal contractor and his or her surety for the full amount due. Such action must be brought within six months after completion of the last work on the project. The statutory language does not specifically say when the six-month period runs. Arguably it means from completion of the overall project, similar to the timing requirements of C.R.S. § 38-22-110. But the specific words used in C.R.S. § 38-22-129(2) differ from those in C.R.S. § 38-22-110. C.R.S. § 38-22-110 states, "No...