Mechanic’s Liens - Best Practices

Nov. 10, 2020
The law of mechanics liens is a powerful remedy for construction professionals and others who provide services for buildings and other property.

By Chris Griffiths

A mechanic’s lien is a lien that arises when a construction professional performs work on another person’s property. This type of a lien provides the construction professional with a security interest on the property that they’re performing work on, ensuring their work is paid for.

The general theory for a mechanic’s lien is that if the construction professional is improving the property’s value, they should be paid for those improvements. If the property owner does not pay, then the construction professional should be entitled to receive the money from the property itself.

The law of mechanics liens is a powerful remedy for construction professionals and others who provide services for buildings and other property. However, because it is such a powerful remedy, there are many rules that construction professionals must follow to meet the legal requirements for having a lien.

Be Aware of Deadlines and Rights

There are numerous time requirements and deadlines associated with filing and notifying the owner about a mechanics lien in Colorado. Some of the most important dates that you should consider are the date when the work begins and the date when the work ends. Although there are many exceptions, the mechanic’s lien begins to accrue when you start work and ends when your work is complete.

Some nuances and exceptions include times when a construction professional performs some work and then abandons the project or when the owner fires the construction professional. Other nuanced scenarios include situations where the construction professional performs one scope of work, stops working, and then performs another, different scope of work under a separate contract.

In Colorado, once the work is complete and the construction professional intends to file a lien, there are several time requirements, including filing a notice of intent to lien, a mechanic’s lien statement itself, and then ultimately, a foreclosure action, which may be necessary to enforce the construction professional’s rights. If the construction professional misses any of these deadlines, they may forfeit their rights to a mechanic’s lien.

Another related component to deadlines is the concept of an excessive lien. Under the mechanic’s lien statutes in Colorado, a construction professional may not file an “excessive lien.” An excessive lien is a lien for an amount greater than the construction professional’s owed. The excessive lien rule prevents construction professionals from filing bogus mechanics liens and ensuring that the construction professional’s mechanic lien is for a proper amount.

However, for this blog, you need to know that the deadlines for mechanics’ liens are short, and to comply with those deadlines properly, you need to know precisely how much money you were owed on the project. While this may seem straightforward at first, sometimes it’s not. The construction professional may have outstanding change orders or other disagreements with the owner. There could also be instances where work has been performed, but the value of the work is not entirely clear at the time the work is completed.

Because of how fast the deadlines are, you must immediately begin accounting for the cost of every item of work that you perform on the project as soon as your work is complete, particularly if you think a mechanics lien may be necessary. If you fall behind and don’t have the information, you may not meet the deadlines for the mechanic’s lien, or you will file a mechanic’s lien that is excessive because you do not know precisely how much money you were owed. Either missing the deadline or filing an excessive lien will cause the construction professional to lose their lien claim.

To ensure that you file a lien statement that is for the correct amount, account for your costs ahead of time, consult an Attorney.

For a lien to be enforceable, you must follow specific procedures and timelines. Failing to do so can lead to wasted time and money. For example, filing an excessive or untimely lien may forfeit all of your rights.

Filing Process

If you proceed without the help of an attorney, it’s essential to understand the filing process. This infographic will help you gain the confidence to pursue the compensation you deserve for your work. Follow the arrows, choosing the situation that applies to you, and you will gain an understanding of your proper course of action.

If you are an owner and you are concerned that your upcoming project may lead to legal issues, there are a couple of key things to consider before proceeding with a construction professional.

Know Your Rights and What’s at Stake

Many owners don’t know that a mechanic’s lien is a risk until they have one filed against their property. Before you hire anyone to do contracting work on your home or property, review the mechanic’s lien laws in your state. Homeowners often believe that they are in the clear if they pay their general contractor in full and on time. They are often surprised to learn that a lien can still be filed on their property if the general contractor does not pay the suppliers or subcontractors. The payment is then their responsibility if they want to sell or refinance their home, regardless of whether the general contractor was paid. If this happens to you, you do have other legal options. However, avoiding a lien is ideal.

Research a Construction Professional Before Hiring Them

The best way to avoid a mechanic’s lien for unpaid subcontractors, laborers, or suppliers is to research a construction professional thoroughly before hiring them. For how much time many homeowners spend on verifying the quality of a construction professional’s work, they usually spend minimal or no time on checking a construction professional’s payment practices. Essentially, you want to put a potential construction professional through a pre-screening interview. Ask them about their payment practices and their payment schedules and plans. Don’t be afraid to ask how they plan to ensure that every subcontractor and supplier is paid in full and on time.

A reliable general contractor will understand these questions and answer them in good faith. You can also look into other work they’ve done. Look into review sites to find out if past clients have had issues with unexpected liens. Keep an eye out for disgruntled suppliers or laborers who haven’t been paid by the general construction professional.

Finally, using the infographic above, an owner can see the various timeframes when their property is at risk. Once the time limits for filing a mechanic’s lien expire, the contractor loses their rights, and the owner is in a much better position. Owners should understand and calendar the deadlines for mechanic’s liens just as much as contractors should.

Chris Griffiths is a shareholder at Griffiths Law PC and focuses his practice on complex civil litigation and family law matters. His civil litigation practice focuses on construction, insurance, real estate, commercial, and business disputes

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