By: Olayinka Hamza
Oftentimes, a subcontractor and a property owner will find themselves in the midst of an unforeseen conundrum. The homeowner has paid the general contractor to perform construction improvements to its property. In turn, the general contractor has hired a subcontractor that the homeowner happens to have a pleasant and pre-existing relationship with. The property owner is thrilled, and all seems well. The subcontractor performs the work on the general contractor’s orders. The homeowner has paid the general contractor. And then the other shoe drops. The general contractor skips town without paying the subcontractor, and the familiar subcontractor remains unpaid for his work.
Many subcontractors hesitate to do much about recording a lien under these circumstances, often preferring to see how the homeowner’s dispute with the general contractor pans out. That is a crucial mistake. In Colorado, the Mechanic’s Lien Statement establishes the unpaid contractor’s security interest against the property and its owner. And under C.R.S. § § 38-22-109(4), a contractor generally must file its lien statement within 120 days from the date of the last work (or supplies) furnished or performed on the property. Id. Once the lien right is established, the contractor must foreclose upon the lien within six months, so long as the lien complies with the other provisions of the General Mechanics’ Lien Statute. See, e.g. Merrick & Co. v. Estate of Verzuh, 987 P.2d 950, 953-54 (Colo. App. 1999).
Absent specific bankruptcy considerations, enforcement of the Mechanic’s Lien statute’s strict timelines is not tolled for any other reason, and a contractor that fails to follow the statute’s strict timelines forfeits its right to assert a mechanic’s lien. Hence, even if the property owner eventually views a contractor’s recordation of its lien statement as a breach of the parties pre-existing relationship or “understanding,” recording the lien is a legal right that no contractor should forfeit on the mistaken belief that a pre-existing relationship will preserve the contractor’s right to payment. The mechanic’s lien provides greater protection to the subcontractor because it runs with the improved property. This means even if the property owner sells the property to a third party, the lien will remain on the property (along with the right to foreclose and collect payment) despite the change of ownership.