Colorado, like many states, allows mechanics liens to be placed on property where a prime contractor, subcontractor, supplier, and laborer performed work. In Colorado, as in all states, mechanics liens are filed on construction projects. But the mechanics lien laws are a double edged sword, and the lienor must be sure that he is properly liening the construction project. A recent decision by the Colorado Court of Appeals in Byerly v. Bank of Colorado puts lienors on notice that improperly filed liens will be declared invalid.
The case is unique because it relates to a contract between a developer and a contractor where the fee was not just monetary: the developer was to give the contractor 5 acres of land as compensation in addition to certain monthly monetary compensation. However, the contract states that the contractor would only receive the land as compensation if the developer was released from the construction loan the bank had issued. This arrangement appeared to make the payment of the land contingent on certain circumstances: the release of the construction loan by the bank.
Instead, the developer was unable to sell the lots it was developing, and then failed to pay the contractor’s fees. The contractor filed a Colorado mechanics liens in the amount of the unpaid monthly fees and for the value of the land it was supposed to receive under the contract. When the bank foreclosed, it attempted to get rid of the contractor mechanics lien by arguing that the amount of the lien was excessive and that a contractor cannot file a lien for an amount over and above the contract price.
The Colorado Court of Appeals held that the maximum amount for which a prime contractor can file a lien is the contract price. The Court also found that the “conditions precedent” had not been established in order to file a lien for the value of the land, so the filing of a mechanics lien was not valid to the extent that these amounts were included therein.
Note that the court indicated that its holding does not necessarily apply to all circumstances. If the contract has not been recorded as required by statute, then subcontractors, suppliers, and laborers may file a mechanic’s lien for the full value of the services and labor provided, regardless of the contract price.
In Colorado, liens filed on private property or on funds relating to a public project are known as Mechanic’s Liens. When a Colorado mechanic’s lien is filed with regard to work performed on privately owned property, it attaches to and encumbers the fee simple ownership of property. Colorado mechanic’s liens filed with regard to public projects attach to the funds held by the public owner.
Contractors, as well as subcontractors, design professionals, sub-subcontractors and material suppliers can file a Colorado mechanic’s lien. If a company supplies material to a material supplier, they are not eligible to file a Colorado mechanics lien claim.
At least 10 days prior to filing a Colorado mechanic’s lien statement, the claimant must provide a notice of intent to the owner and the prime contractor. The filing of a Colorado lien statement must be completed within four months after the day on which the lien claimant last performed labor or furnished materials. Once the mechanic’s lien has been filed, be sure to serve it on the owner via certified, return receipt mail.
Liens filed on private property or on funds relating to a public project are known as Mechanic’s Liens. When a lien is filed with regard to work performed on privately owned property, it attaches to and encumbers the fee simple ownership of property. Liens filed with regard to public projects attach to the funds held by the public owner. Contractors, as well as subcontractors, design professionals, sub-subcontractors and material suppliers can file a lien. If a company supplies material to a material supplier, they are not eligible to file a lien claim. Colorado does require that certain pre-lien notices be provided prior to a claimaint files a mechanics lien. At least 10 days prior to filing a lien statement, the claimant must provide a notice of intent to the owner and the prime contractor. One the pre-lien notice requirement is fulfilled, the claimant can file a lien. The filing of a construction lien statement must be completed within four months after the day on which the lien claimant last performed labor or furnished materials. LienItNow.com also prepares and serves Colorado Stop Notices. A Stop Notice is a notification that has the ability to enhance the effectiveness of a mechanic’s lien. A Stop Notice, or a notice to withhold funds, is sent to the company that is financing or funding the construction funds for a project. Once that company receives the Stop Notice, that company has notice that it should withhold sufficient money to satisfy the stop notice claim. The purpose of the Stop Notice is to provide the lender, financiers or funders of the construction project notice that there is money owed to a contractor, subcontractor or supplier so that an inquiry can be made as to why that money is not being paid. For more information on filing a Colorado Construction Lien, a Colorado Mechanics Lien, or a Colorado pre-lien notice, please visit http://www.lienitnow.com/colorado-faq.asp.