As a matter of public policy, contractors, subcontractors, materialmen and others who improve real property are entitlted to collect the value of the improvements to the property. Establishing a mechanic’s lien on the property establishes not a title to the property, but rather a charge upon it, giving the right to the sucessful claimant to have a debt satisfied from the property. The lien creates an incumprance upon the property giving the claimant leverage in receiving satisfaction from the debt. Mechanics lien statues arise from Federal Statutes, however statutes giving rise to the satisfaction of a debt represented by mechanic’s liens are found in most jurisdictions. The following applies primarily to Colorado Statutes, however most jurisdictions requirements are similar.

 

A vast amount of mechanics, or improvers to the real property are entitled to place a mechanic’s lien on the property to establish the right in satisfaction of the dept. These include not only contractors, subcontractors and materialmen, but also architects, engineers, superintendents, artisans, and others who describe and illustrate the property. Brokers who do not perform actual work on the property, as well as suppliers to suppliers generally do not have lien rights.

In establishing a lien, it is important that the lien amount not be overstated, but based on reasonable value of the lienable items. These items include labor, materials, rentals, and other items incorporated into the property. Removable fixtures, re-usable tools, and attorney’s fees are generally not lienable. It is important the a claimant not overstate the value of the lienable items, as doing such could cause the lien to be invalidated in its entirety.

Strict timeframes are stated for the lien process. The claimanat must give a Notice of Intent to Lien at least 10 days prior to filing of the lien. The claimant generally has lien rights for four months after the last improvements are made to the property by the claimant. A shorter time frame exists for those providing "day labor". The notice and lien period timeframes are strictly interpreted, and if not followed exactly, can cause the lien to be invalidated. The lien is placed and is valid for a specific timeframe, generally six months after substantial completion of the project. The lien must then be "perfected", pleading to the courts to cause the debt to be satisfied by filing a foreclosure lawsuit.

The property owner can cause the lien to be removed if the lien is not perfected within the legal time frames, and can otherwise defend against the lien by bonding around it. This allows the owner to transfer ownership of the property even with the lien in place, requiring the claimant to perfect the lien within the required periods. Since defending and/or bonding around the lien can cost substantial sums of money, the best way to defend against the lien is to ensure that the materialmen are paid in a timely manner. Should payment be made to the contractor, but the subcontractor or materialmen remain unpaid, the materialmen still have lien rights against the property itself. This forces the property owner to monitor lower tier payments even though the prime contractor has been paid and has released their lien rights. The best way to ensure that the property remain lien free is to apply a strict and disiplined approach to the payment and lien release process. Open communication with the materialmen is mandatory.

On Site Systems Can Help Keep Your Project Lien Free!