Fight the Lien on Your Home

It can be unnerving to discover you have a lien on your house. The good news is, there are ways to fight a lien on your home.

This article explores what to do next if you discover a mechanic’s lien on your home.

When Projects Don’t Go as Planned

Unfortunately, when a promising home renovation project turns sour, your dream home can quickly become a nightmare.

This scenario happens all the time:

A homeowner blames their contractor for the project’s problems and refuses payment. The contractor blames the homeowner for the mess. So, the contractor turns around and files a legal claim against your home called a mechanic’s lien.

Anyone who supplies labor or materials for a project can file a mechanic’s lien. This includes general contractors, subcontractors, and suppliers.

If a mechanic’s lien is properly utilized, a contractor can force your home into foreclosure to get paid.

What Now?

First and foremost, you need to hire an attorney to help you fight against the contractor who filed a lien on your property. That attorney can help you find out what kind of lien you are dealing with. There are a couple of different ways you can figure this out.

Most people find out they have a lien on their property when they want to sell or refinance it. However, there are other ways to find out without putting your house on the market or going to the bank.

You can order what is called an owner’s and encumbrances report, or an O & E report. This report comes from a title company. In this report, you’ll receive a copy of the lien so you can figure out exactly what kind it is.

Does a Contractor Have to Notify Me Before Filing a Mechanic’s Lien?

It depends. If the project is still pending, a contractor is not legally required to submit a preliminary lien notice.

If the project is complete, a contractor must provide a notice of intent to file a lien—along with an affidavit of service—10 days before officially filing the lien. C.R.S. § 38-22-109

How Long Does a Contractor Have to File a Mechanic’s Lien?

In Colorado, a contractor must file a mechanic’s lien four months after the day they last worked on or furnished materials for a project. C.R.S. § 38-22-109(5)

If the amount listed on the lien is not paid within six months after the last labor was performed or materials were furnished, the subcontractor must file a motion to enforce the lien. To do so, they must file a notice of enforcement with the county clerk and recorder. C.R.S. § 38-22-110

If the subcontractor does not file an action to foreclose on your property within the six-month period, the lien expires. Schlosky v. Mobile Premix Concrete, Inc., 656 P.2d 1321, 1322 (Colo. App. 1982)

What if I Paid Everything?

Colorado law protects homeowners from mechanic’s liens if they have paid the general contractor. C.R.S. § 38-22-102

If you can prove you paid the general contractor, and the general contractor then failed to pay the subcontractors, the subcontractors cannot enforce a mechanic’s lien against your property.

A Colorado Case: Builders’ Failure to Pay Subcontractors Led to Lien Against Homeowners

In December 1989, Michael and Cynthia Brown hired a contractor to build a home on their El Paso County property. When construction began, the couple gave the builder, Brent Gibson Homes, Inc., a $27,500 down payment. The Browns paid the remaining balance in June 1990, when the builders officially transferred the property’s title to them.

However, the builders failed to fully pay the plumbing subcontractor before the title was transferred to the Browns. In turn, the subcontractor filed a mechanic’s lien against the Browns in an attempt to collect their money.

An El Paso County court dismissed the subcontractor’s action to foreclose on the Browns’ home. The subcontractors appealed.

In the appeal, the subcontractor claimed the builders were still a partial owner of the home—rather than a contractor—when the Browns paid them. Therefore, the subcontractor argued they could enforce the lien “because payment was not made by the owner ‘to the principal contractor or any subcontractor.’” Koch Plumbing & Heating, Inc. v. Brown, 835 P.2d 610, 612 (Colo. App. 1992)

However, a Colorado Court of Appeals upheld the trial court’s decision:

“Accordingly, regardless of Gibson’s status as an owner, when the Browns paid Gibson various amounts over time, constituting the full purchase price for their home, the payment was made to Gibson as contractor, by necessity either principal contractor or subcontractor, and the statute’s provisions were automatically triggered to protect the Browns, as homeowners, from subsequent liens against their residence.” Koch Plumbing & Heating, Inc. v. Brown, 835 P.2d 610, 612-13 (Colo. App. 1992)

What Can I Do About a Mechanic’s Lien?

A mechanic’s lien is a powerful tool in the hands of a contractor. However, a contractor must follow Colorado’s mechanic’s lien laws to the letter—including their legal duty to inform you about the lien within a certain timeframe.

If a contractor has placed a mechanic’s lien on your property, you have several options.

Wait it Out

If you are not in a rush to have the lien removed, you can wait it out. In Colorado, a mechanic’s lien is only enforceable for up to six months after one of the following events:

the last date work was performed,
the last date materials were furnished; or
the date the project was completed.

File a Surety Bond

If you cannot wait out the lien, you may want to file a surety bond with the district court where your property is located. The surety bond must be 1.5 times the value of the lien. C.R.S. § 38-22-131

A surety bond is a legally binding three-party contract meant to provide a financial guarantee that one party will fulfill its obligation to a second party. A neutral third party, typically an insurance company, guarantees that the first party will make good on its promise.

The district court will hold the surety bond and remove the lien. However, you will unfortunately not have access to the money until either the contractor forecloses on the surety bond or you can prove the lien is unenforceable.

File a Declaratory Relief Action

If other options fail, you can request relief in district court under Colorado Rules of Civil Procedure, Rules 57 and 105. However, this won’t necessarily be a speedy process.

Rule 57 allows you to ask a court for what’s called a declaratory judgment wherein the Court decides whether the mechanic’s lien is valid or should be released from your property. After your claim is filed with the court and a copy is served on the contractor or subcontractor, they’ll be given the opportunity to argue why they believe the mechanic’s lien is valid.

Rule 105, in turn, allows courts to determine what rights the parties have in real property, including the rights of a lien claimant.

“An action may be brought for the purpose of obtaining a complete adjudication of the rights of all parties thereto, with respect to any real property and for damages, if any, for the withholding of possession. The court in its decree shall grant full and adequate relief so as to completely determine the controversy and enforce the rights of the parties.” C.R.C.P. 105(a)

If a party files a lien in an amount they know to be excessive, and without a reasonable possibility of collecting that amount, the court may declare the lien invalid, and award the homeowner their costs and attorney fees incurred in having the lien removed.

“Any person who files a lien under this article for an amount greater than is due without a reasonable possibility that said amount claimed is due and with the knowledge that said amount claimed is greater than that amount then due, and that fact is shown in any proceeding under this article, shall forfeit all rights to such lien plus such person shall be liable to the person against whom the lien was filed in an amount equal to the costs and all attorney’s fees.” C.R.S., § 38-22-128

Let Us Help You Fight a Mechanic’s Lien

It’s upsetting to find out there’s a lien on your property. We understand. But our real estate attorneys also know these liens are almost always not the end of the world. Most situations in which a lien is involved are settled well before foreclosure comes into play.

An experienced real estate attorney can help you work it out. If you have more questions about a lien on your property, please do not hesitate to call us. We always offer a case assessment. Call 303-688-0944. You can also click here to schedule.