This article is reproduced from the Summit Daily News, May 13, 2009, by permission of the author Noah Klug.
Top 10 things to know about mechanic’s liens
As the construction season begins in the mountains, here are 10 things to know about mechanic’s liens:
1. What is a mechanic’s lien?
State law gives a lien to most workers on real property and suppliers of materials incorporated into real property to help protect against nonpayment. The law calls these people “mechanics.” A mechanic’s lien makes it more likely the “little guy” will get paid.
2. Who can claim a mechanic’s lien?
Almost any person who performs work or supplies materials to improve another person’s property can claim a lien, including contractors, subcontractors, decorators, tree services, architects, surveyors, and engineers (but not lawyers or real estate brokers).
3. What is the process for claiming a mechanic’s lien?
A person entitled to a mechanic’s lien who has not been paid must first give 10 days’ notice to the property owner and general contractor of his intent to record the lien. The notice must include certain information and must be delivered in person or by regular or certified mail. If the worker is not paid during the 10-day period, he can record the lien statement in the office of the Clerk and Recorder.
4. Are there any deadlines for recording a mechanic’s lien?
Yes. A lien statement must generally be recorded no more than four months after the worker did his last substantial work at the property (so the worker must allow 10 extra days before the recording deadline to deliver the notice of intent to file the lien). The four-month deadline can be extended if the worker records, within the four-month period, a proper notice to extend the time.
5. What happens if the worker doesn’t follow the statutory procedure for filing a mechanic’s lien?
Courts typically enforce the mechanic’s lien statute strictly, which means that failure to give proper notice or to meet deadlines may result in a lien being invalidated.
6. What are the options once a lien has been recorded?
The lien claimant can (a) file a lawsuit in district court to have the sheriff sell the property to satisfy the liens; (b) let a another lienholder file the lawsuit and jump into the lawsuit; or (c) take no action and pray that he gets paid before the lien expires. With a few exceptions, the lien will expire if a lien foreclosure lawsuit is not filed within six months after the whole project is completed or 12 months after the lien is recorded (whichever is sooner).
7. What is the priority of a mechanic’s lien?
A mechanic’s lien is given special priority by statute; its date of priority is the date that the first work was done on the project by any worker. This is often the date that the architect drew plans or that the property was surveyed, and it often predates a construction loan. (For a discussion of lien priority, see my April 29 column on Lien Priority Fundamentals).
8. What are the alternatives to filing a mechanic’s lien?
Mechanic’s lien litigation is complex and expensive, with little hope of recovering attorney fees. Some mechanics with modest claims (or invalid liens) choose to skip lien litigation and simply file a lawsuit for breach of contract against the person who should have paid. If the claim is less than $7,500, it can usually be filed in small claims court, where things happen quickly, inexpensively, and (usually) without lawyers. County court is almost as quick and simple and has jurisdiction over claims up to $15,000.
9. What happens if the worker files a lien for more than he is owed?
If a worker knowingly files a lien for more than he could reasonably recover in court, the whole lien could be invalidated and the owner could be awarded his attorney fees.
10. What if the owner pays the general contractor but the general doesn’t pay a subcontractor?
The subcontractor is still entitled to a lien on the property.
Noah Klug is an attorney with Bauer & Burns P.C. He may be reached at (970) 453-2734 or
Noah@BreckenridgeLawyer.com.
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