What Happens After I Record My Lien? - Colorado Webinar

This webinar is hosted by SunRay Construction Solutions and legal expert Shannon Bell for those who have already properly recorded a mechanic’s lien in Colorado. While filing the lien is an important step, it’s not the final one. Recording a lien with the county clerk doesn’t automatically result in payment—you must take further legal action. The next and most important step is foreclosing the lien to enforce your rights and recover what you're owed. Let’s now understand how to foreclose a lien in Colorado.

What is a Lien Foreclosure?

Foreclosing a lien means initiating a lawsuit to force the sale of the property, allowing you to get paid through your lien rights. Like the mechanic’s lien itself, lien foreclosure is governed by strict statutory deadlines. In Colorado, for instance, a mechanic’s lien claimant must bring a foreclosure action within six months of one of the following dates:

• The date the last work was performed

• The date the last materials were furnished

• The date of completion of the building or improvement

These dates pertain to the entire project—not necessarily your specific portion of the work. Therefore, it's essential to monitor the status of the overall project. For example, if you're a framer working early on, your six-month period starts much sooner than someone completing finishing touches later in the project. When in doubt, file that lien foreclosure action. It preserves the statute of limitations, and you can always stay the action if needed.

Protecting Your Rights with a Foreclosure Action

Filing a lien foreclosure action doesn’t mean you can’t include other legal claims. In fact, 99% of the time, lien foreclosures are accompanied by a breach of contract claim. The lien is simply an additional method of securing payment. The breach of contract claim targets the party that hired you and failed to pay—unless they have a valid defense like defective work or project delays.

Make sure to name all interested parties in your foreclosure complaint. The best way to do this is to work with a title company to obtain an Ownership and Encumbrance (O&E) report. These reports are relatively inexpensive and essential to ensuring that you include every party with a potential interest in the property. This step is critical, especially because part of the foreclosure process involves determining priority—who gets paid first.

Generally, if your work involves new construction, you may jump to the front of the line with a first interest over other recorded deeds. For remodeling work, your lien may be subordinate to existing mortgages or deeds of trust. Knowing where you stand in this hierarchy helps you evaluate whether a lien foreclosure or a straightforward breach of contract lawsuit is more beneficial.

Collective Action and Arbitration Considerations

When multiple contractors, subcontractors, or suppliers aren’t paid, the first to file a lien foreclosure action effectively starts a process that others can join. This preserves the statute of limitations for everyone who intervenes in the case.

Another common complexity in construction contracts is the arbitration clause. Many contracts include a clause requiring disputes to go through arbitration under entities like the American Arbitration Association (AAA). If you file a lien foreclosure action and the other party invokes arbitration, you still file the foreclosure to preserve your rights but then move to stay the case pending the outcome of arbitration. Courts generally grant such a stay, especially in states like Colorado.

This may seem inefficient—you’ll need to file in district court, then arbitrate, and then possibly return to court. But the lien foreclosure ensures that you meet statutory deadlines and don’t waive your lien rights. After arbitration, you may not need to continue with the foreclosure if the matter is resolved, but you’ll have protected your claim.

Bond Substitutions and Their Impact

Sometimes, even before you begin foreclosure, a property owner may bond around the lien to clear title and sell the property. In such cases, a surety bond substitutes for the lien, and the court may allow this substitution ex parte, meaning without notifying you. This still protects you, but you must now foreclose against the bond instead of the property. The same statutory timelines apply—you must foreclose within six months, even if a bond is substituted.

Don't confuse this with payment or performance bonds required on public projects. You can’t lien public property, so these bonds are your only form of protection. Make sure to obtain copies of such bonds before starting work. Like lien foreclosures, bond claims typically have a six-month statute of limitations after project completion.

Contractual Claims: Breach and Unjust Enrichment

At the root of most lien claims is a breach of contract—a party promised to pay you for work or materials and failed to do so. Liens and bonds are just added layers of protection in case the party at fault is insolvent or otherwise unreachable.

In some cases, particularly where there is no formal contract, you may also assert a claim for unjust enrichment. This applies when one party unfairly benefits from another’s labor or materials without paying, and no formal agreement exists. However, some jurisdictions may not allow unjust enrichment claims when a mechanic’s lien has already been recorded, so know your local laws.

Negotiating Contracts with Protections

If you're in a position to negotiate your contracts, include a prevailing party clause. This clause entitles the winning party in a legal dispute to recover attorney’s fees and court costs. Without this clause, even if you win a $50,000 claim, you might spend $20,000 in legal fees and only net $30,000. A prevailing party clause can make pursuing legal action financially worthwhile.

Also, beware of lien waivers. These documents essentially act as receipts confirming payment and waiving your right to file a lien. Don’t sign one unless it accurately reflects the amount you’ve been paid. These waivers are legally enforceable, so treat them with caution.

Final Thoughts

Mechanic’s lien law is complex and varies by state. Always consult with knowledgeable local counsel to ensure you are preserving your rights. Whether you’re dealing with arbitration clauses, bond substitutions, or lien waivers, understanding your options and statutory deadlines is crucial to enforcing your lien and getting paid for your hard work. Don’t wait—act promptly and strategically to protect your interests.

Common Questions Contractors Ask

1. Can a lien be amended in Colorado?

Yes, a lien can and should be amended in Colorado when circumstances change. For example:

• If you originally recorded a lien for $200,000 and later receive a partial payment of $50,000, you must amend the lien to reflect the updated amount of $150,000.

• Why is this important? Because an overstated lien—a lien recorded for more than you are actually owed—can be challenged and potentially invalidated entirely.

Amendments are also possible in the opposite direction. If you're getting paid slowly, you might file a lien when you're owed $50,000, and then as more work is performed and payments are delayed, you might eventually be owed $100,000. In this case, you can amend the lien upward to reflect the new amount.

2. Can I extend my time to record a lien in Colorado?

Yes. Colorado law allows you to record a Notice of Extension to preserve your right to record a lien later. Important points:

• This notice must be recorded within four months of when you last performed work or delivered materials.

• It does not require that you notify the property owner.

• It doesn't affect your ability to foreclose, but it extends your time to record the lien itself—especially useful in long-running projects.

For instance, if your work ends in January, but the entire project won’t finish for another six months, this notice can effectively tie your lien rights to the completion of the entire project, not just your portion.

3. Can you extend the deadline to file a lien foreclosure suit in Colorado?

No, unfortunately there is no way to extend the deadline to file a lien foreclosure lawsuit. Here's what you need to know:

• The foreclosure action must be filed in court within six months of the lien trigger date.

• That trigger date is usually the completion of the project, though in some cases, subsequent material deliveries or additional work may affect the date.

In short: while you can extend your lien recording timeline, there is no extension allowed for your foreclosure deadline. Plan accordingly.

4. In Colorado, can you put a lien on a tenant’s interest in a property?

Generally, no. Here's why:

• In Colorado, a mechanics lien attaches to real property—typically the landlord’s ownership interest, not the tenant’s.

• If you're hired by a tenant (such as for tenant improvements, or TIs), you’re likely improving the landlord’s property.

• Many landlords post "Notices of Non-Lienability", which publicly state that tenant work is not lienable.

• If such notice is posted, you cannot lien the property, even if you're working for the tenant.

5. Can you lien the tenant’s interest instead?

• Colorado law does not recognize a tenant’s leasehold or personal interest as lienable real property.

• Unlike some states where you can lien a tenant’s leasehold interest, Colorado doesn’t allow this.

• A mechanics lien cannot be applied to personal property, which is all a tenant typically owns on a leased property.

If you’re hired by a tenant and the landlord has protections in place, your lien rights may be very limited or non-existent.