As a homeowner in Colorado, your home is not merely a place to live, but also a valuable asset. You may wish to sell or refinance it over the course of your life.
Unfortunately, mechanic’s liens placed on your property can impede these efforts and diminish the value of your home. Liens are essentially clouds on your home title, usually filed by contractors or subcontractors who claim that they are owed money for repair or renovation work done on the property.
Imagine, for example, an electrician who claims that she fixed the lighting in your Boulder condo without receiving compensation from you, or a brick company that claims it laid bricks in your Denver driveway but was never paid the contract balance. These entities can potentially sue you for breach of contract. But they can also secure their financial interests without filing a formal lawsuit against you in the Colorado District Court, by filing a simple lien.
What exactly is a mechanic’s lien, and what can you do if one is placed on your Colorado home?
As a Colorado homeowner, you have hopefully never encountered a mechanic’s lien. These legal documents are somewhat obscure compared to regular lawsuits.
In a nutshell, a lien is a document that gets publicly filed in the Colorado county clerk’s office where the subject property is located. You may know that there are 64 counties in Colorado; the contractor would file the lien in the county where your home is (not necessarily the one where his or her business is based). Once filed, the lien creates a situation where your home title is subject to the contractor’s stated financial interest in it.
To understand how a lien functions in practical terms, consider this example: You hire a plumbing company to install new pipes in your basement in your home in Boulder. After the contractor finishes the work, the company tries to charge you $5,000 more than you had agreed in the original contract, or claims that you asked for additional work when you did not.
You refuse to pay the additional sum. The contractor could then file a $5,000 mechanic’s lien with the clerk in Boulder County. Anyone who was to buy your property would now do so subject to owing the contractor that $5,000. This will make it difficult to sell or refinance the property. Contractors therefore use liens as a means of incentivizing property owners like you to settle with them.
Under the Colorado statute, the person or entity filing the lien (the "lienor") must include on the document the company’s name, the owner’s name, the location of the property, and the amount of money still due, among other pieces of information. The lienor must also describe the labor or material provided (in other words, how the contractor improved your property).
Now that you have a basic understanding of what liens are and what they do, you can consider how to fight them.
The best way to fight a lien is to avoid it altogether—most likely by engaging in a reasonable negotiation with your Colorado contractor before the lien is filed. Liens are typically a sign of frustration that the relationship between you and your contractor has broken down. The contractor believes you are either ignoring payment requests or have no intention of entering into a good faith negotiation.
If your contractor claims to be owed an extra sum of money, do not just ignore the phone calls or invoices. While you might think that this will convince your contractor to simply go away, the contractor might view it as a brushoff, prompting a lien, a lawsuit, or both.
You and the contractor may have a good faith disagreement about whether certain work was part of the contract, or about the quality of that work. Rather than ignoring the issue, have a frank discussion about it, or consider going to mediation. In mediation, a third-party neutral (often an attorney or individual with experience in the construction industry) can help you and your contractor to negotiate a fair settlement.
In both negotiation and mediation, you should be open to creative settlement strategies. Rather than paying a lump sum, for instance, perhaps you could schedule payments over time. Rather than a monetary settlement, maybe you could offer the contractor a public endorsement or reference. Rather than fighting in court, you could offer the contractor discounted payment in exchange for a limited scope of ongoing work. The possibilities depend on the facts of the situation.
Of course, there are legal remedies available to Colorado homeowners to fight a lien after it is filed. However, you are likely to save time and money if you find a way to settle the dispute. This does not necessarily mean giving in to all of the contractor’s demands, but it does mean bearing in mind the costs of legal action when strategizing your approach.
Liens are the result of a statute known as C.R.S. § 38-22-101, et seq. If a lien is placed on your property, it will be helpful to familiarize yourself with this legislation; although, as with most states’ lien statutes, Colorado’s rules are complex, containing many rules and exceptions, depending on the type of property involved and the work performed. But there are some general important concepts to remember:
How can you remove a lien on your property once it’s filed? There are several strategies to get the lien removed in Colorado. The first, as mentioned, is to negotiate a resolution with your contractor.
A second option is to obtain what’s known as a “lien bond,” through a surety company. The bond essentially guarantees payment to the contractor in the amount of the lien if the contractor is successful on the legal claims, but also removes the lien from your property record.
A third option is to petition a court (specifically, the Colorado District Court serving your county) to remove the lien. Your grounds for removal could include that the contractor never did the work that the lien claims, or that the work was already compensated. This would require you to present evidence in support of your allegations, possibly through expert testimony.
You can also attack legal deficiencies in the contractor’s lien filing. The most legal common deficiency for Colorado liens involves the strict deadlines for filing.
In most situations, an entity seeking to file a lien must do so within four months of the date that work was last performed or that materials were last supplied to the property. C.R.S. 38-22-109(5) provides that “the lien statements of all other lien claimants must be filed for record at any time before the expiration of four months after the day on which the last labor is performed or the last laborers or materials are furnished by such lien claimant.” For example, if a roofing company last performed work on your house on January 1, it would have until July 1 to file the lien.
Certain laborers have an even shorter deadline: under C.R.S. 38-22-109(4), those who provide only labor (but no materials) have a two-month limitation period.
Once filed, liens do not last forever. C.R.S. 38-22-109(10) provides that (unless previously dealt with) they “automatically terminate six months after the date said notice is filed.”
The statute goes on to explain that, if the structure or other improvements aren't completed before termination of the notice, "a claimant, prior to said termination date, may file a new or amended notice which shall remain effective for an additional period of six months after the date of filing or four months after the date of completion of said structure or other improvements, whichever occurs first.” In other words, you must normally sue the owner (commonly known as filing a lien foreclosure action) within six months of the lien filing.
Keep each of these deadlines in mind; they are a homeowner’s friend. These short periods underscore the need for lienors to quickly identify any unpaid monies and file a lien accordingly. Often, busy contractors will sit on their rights for too long, in which case Colorado law will no longer permit their liens to be sustained against your property.
Liens are, unfortunately, a risk that comes with Colorado home improvement projects. Homeowners should not be overly surprised if facing a lien filed on their property (or at least the threat of such a filing) during or after a construction project.
Fortunately, few contractors in the Centennial State wish to actually initiate litigation against a homeowner in order to foreclose on a lien. Litigation is time-consuming and expensive. Most contractors would prefer to settle quickly, for a reasonable sum. Keep this leverage in mind as you explore the legal options available to you under Colorado law.
Finally, remember that liens and the laws surrounding them in Colorado can be highly technical. Retaining an attorney with experience in construction or real estate law might be worth your expense, depending on the amount of money in dispute. For more on retaining a qualified lawyer to suit your situation, check out Guide to Finding an Excellent Attorney.