Tuesday, March 8, 2011

Mechanic's Liens

In construction cases, contractors and subcontractors often use a mechanic's lien to make sure they are paid for the work they perform. Here are the key issues and necessary steps to file a mechanic's lien in Colorado.

First, the person filing the lien (claimant) must be a person who can legally utilize the mechanic's lien statutes. Generally speaking, claimants are contractors, subcontractors, laborers, and persons who supply the material for the project. If the claimant performed service or provided supplies to benefit the land, then there is a pretty good chance the claimant can use the lien laws to make sure payment is made.

Next, the claimant must file a Notice of Intent to File a Lien. This notice is sent to the contractor and the landowner. This must be sent prior to the filing of the lien or else the lien will fail. The Notice of Intent must also be sent via certified mail.

Following 10 days after mailing the Notice of Intent to File a Lien, the claimant may record the lien with the Clerk and Recorder's Office. Once recorded, all persons will have record notice that the claimant has filed a lien against the property.

In Colorado, the claimant must make sure the lien is filed within four months (and in some cases two months) following the last day in which the claimant performed work on the project. As with mailing the Notice of Intent, the timely filing of the lien is critical to the case, and a failure to abide by the time limits is fatal.

Of course, once the lien is recorded, this does not automatically mean that the claimant will be paid for the work performed on the project. It will, however, give the claimant a bargaining tool and leverage when negotiating a settlement and getting paid. Many times the claimant will negotiate with the land owner for payment of the work performed in exchange for releasing the lien. Land owners do not want their properties encumbranced by liens, especially if they wish to sell the properties to the general public. If negotiating a settlement does not work, the claimant can foreclose of the lien by judicial process. Additionally, the claimant could seek for monetary damages by filing a traditional civil suit against the contractor or landowner for unjust enrichment or breach of contract.