One of the common issues contractors and sub-contractors run into in any economy is customers who don’t pay for services rendered. The recent recession made the problem even greater than it had been; so what can a contractor, sub-contractor, labor provider, or supplier do in these circumstances to get paid? One option is the file a mechanic’s lien if the developer or owner of a construction has not paid in a timely manner.
The reason to file a mechanic’s lien claim in court is that it often offers the person who has not been paid the prospect to become a priority creditor; meaning they will be paid first in the event of a bankruptcy.
Generally, the set of rules for filing a mechanics lien on a one or two family domicile in Colorado is straight forward. However, as so often happens, there are a few areas that are not necessarily as straight forward and clear.
In Colorado, a contractor can file a mechanics lien as long as they “furnish or supplies laborers, machinery, tools, or equipment in the prosecution of a the work, and mechanics, materialmen, contractors, subcontractors, builders, and all persons of every class performing labor upon or furnishing labor. . .” and the definition goes on. In short, this means that architects, engineers, draftsmen and artisans are allowed to file mechanics liens. Even a personnel agency who supplied the labor can file for a mechanics lien. There is an exception: on public projects, suppliers to suppliers, architects, engineers, draftsmen and artisans are not protected.
Specific Rules for Filing a Lien
A prime contractor must file a lien within four months after the last materials were delivered or the last labor was provided. If the contractor only supplied labor to a project, they must file the lien within two months of the last time labor was performed. The action that was taken to enforce a lien is required six months after the completion or the last time services or materials were furnished.
If a contractor was hired as a sub or as a laborer, they have four months after the last delivery of services or materials to file the lien. If labor is all that is provided, and materials are not provided, then the sub-contractor only has two months to file the lien. The sub then has six months after the completion or the last furnishing of services or materials to enforce the lien.
When a supplier or someone not previously mentioned are involved in a lien, it must be filed within four months after the last delivery of services or materials. If only labor is provided, and no materials have been used for the project, the time is shortened to two months. Action to enforce the lien is required six months after the completion or the last furnishings of services or materials.
Prior to the Lien
Before the lien is filed, a notice of intent must be on file. Prime contractors, sub-contractors, laborers, suppliers, and others must file a notice of intent to file the lien at least 10 days before filing. The person who had the lien served to them will then have 10 days to resolve the issue, or after that 10 days the lien notice will be filed and will become a part of the public record.
In Colorado, it is advisable to begin the process of filing a lien at 75 days or two and a half months rather than wait until nearer the end of the four months since significant work was done.
A lien notice can be defeated if a certified letter is sent to the incorrect address for either the property owner or the general contractor. It is best to send multiple notices to the parties involved if they have more than one address. It can be beneficial to use a professional process server to deliver the lien if you’re uncertain which address to send the certified letter to. If a certified letter comes back, proof that it was sent to the correct address but declined by the addressee is sufficient evidence that the person filing the lien made a good faith effort to deliver the lien.