Construction projects often have many different parties involved. This can make the payment process convoluted. Even on projects where the property owner made timely, full payments to the general contractor, there are any number of ways payment can get delayed or funds misappropriated. Other times, a party might finish its work before any payments are made. Issues like these can lead to mechanic’s liens being filed against a property, even if you think everything has been working just fine.

Mechanic’s liens are feared by many property owners because of their power to encumber the property or force an owner to pay twice as much for the same work. However, if you take the right steps after receiving a Notice of Intent to Lien, you likely have nothing to fear.

What is a Notice of Intent to Lien?

A notice of intent (“NOI”) is just that – a statement that a lien may be filed, not that one has been filed. This means that when you receive a notice of intent, there is still the possibility to avoid the lien entirely. Receiving an NOI is a benefit, in that: 1) there will be no “hidden lien” of which you had no prior knowledge, and 2) the potential claimant is providing an opportunity to resolve the issue prior to filing a lien.

What Do I Do When I Receive a Notice of Intent to Lien?

First, contact the claimant to get all the information surrounding the potential lien. This will help inform your decisions moving forward. Communication is key in resolving issues, and more often than not, you will be able to avoid the lien filing, though it may require a settlement. If the claimant did not contract with you directly, speak with the general contractor. They will have a better understanding of the payment issue, if any, and which parties have caused the dispute. In addition, the general contractor’s contracts with the subcontractors likely cover payments. The general contractor can help figure out what is going on and should have the leverage to put some pressure on getting it taken care of.

The lien cannot be filed until the payment is due, but you may receive an NOI before. In this case, the claimant is just feeling anxious about getting paid for work performed. Letting the claimant know that payment is forthcoming pursuant to the contract may be enough to alleviate the issue and avoid the lien being filed.

If there is a payment issue, then it is either you or a party down the chain holding things up. If you don’t dispute that an amount is owed, you can contact the claimant and attempt to negotiate a payment plan, or just pay the amount due, to avoid the lien. However, if another party is holding the payment, you can exert pressure, and have the claimant do the same, on the withholding party. Additionally, if feasible, you can pay the claimant directly and then go after the non-paying party to avoid the filing of a lien.

Check the Steps

Lien claimants have statutory requirements that they must follow to properly file a lien. Therefore, it is important to make sure that the potential lien claim is compliant with statutory timing and notice requirements. A lien can be entirely avoided if it does not comply.

First, if the price of the construction work is over $500 and the contract is not in writing, a lien cannot be filed. Second, if the claimant files the lien less than ten days after providing an NOI, the lien will be invalid. Be sure to check the dates. The NOI must be served either by personal service or by registered or certified mail, return receipt requested, to your last known address.

In addition to notice requirements, there are also filing deadlines. Lien statements for labor performed and materials supplied must be filed by the lien claimant within four months of the last day work was performed, or material supplied. Liens for labor and work performed only (not materials) must be filed within two months of the completion of the project. So again, double check the dates! This could be an easy way to invalidate the lien.

The lien statement must contain your name (as property owner), the claimant’s name, a description of the property sufficient enough to identify it, and a statement of the amount owed. If the statement does not contain all of these, it will be invalid.

In addition, check the amount the claimant says you owe. The right to a mechanic’s lien may be forfeited if the claimant files an excessive lien. A lien is considered excessive if (1) it is for an amount greater than what is due, (2) without a reasonable possibility that said amount claimed is due, (3) and with the knowledge that said amount claimed is greater than that amount then due. If the claimant files a lien for an amount higher than contracted for or for an amount not due at the time of filing, the lien will be invalid.

If the lien is properly filed, you should still be aware of deadlines imposed on the claimant. The lien statement is effective no longer than one year from filing unless, within thirty days of its expiration, the lien claimant files with the county recorder an affidavit stating the improvements on the property that have not been completed. They may then receive a six-month extension. In addition, a suit to foreclose a lien must be commenced no later than six months after completion of the project.

With that said, if you are not looking to sell or refinance, there isn’t an issue with your mortgage, and you don’t believe there is anything due to the claimant, you can always just wait it out until the claimant either files suit to enforce the lien, or the lien expires. While this can be the easiest and least expensive way to go about reacting to a lien claim, you must be willing to wait and you must be willing to accept that the lien could be enforced at any time, dragging you into court, and will remain a cloud on your property’s title until removed.

While having a lien filed against your property is never a desired situation, with some homework, it can be handled in an efficient manner. If the lien is for valid work, just paying what is already owed will get it taken care of and any double payment could be recovered from the general contractor. If the lien is not valid, fighting an invalid lien requires organization, but it is not something that you need to panic about.

If you are a homeowner anywhere along the Front Range and are dealing with mechanic’s lien issues, GLO can help you determine what method is best for you. Fill out an interest form today to see if GLO can help you.

GLO has prepared this blog to provide general information on legal issues that may be of interest. This blog does not provide legal advice for any specific situation and this does not create an attorney-client relationship between any reader and GLO or its attorneys. GLO engages clients only through specific fee arrangements and signed engagement letters. GLO does not guarantee any results.