Memorandum of Contract by Corporation
Note: This summary is not intended to be an all-inclusive discussion of Colorado's construction lien laws, but does include
basic provisions.
When and By Whom A Lien May Be Filed
Colorado law recognizes that when a person,
or corporation, provides labor, materials, or laborers for a construction
project or improvement of land, that party shall have the legal authority
to assert a lien against the property being improved. Central to
properly obtaining a lien is the filing of a construction contract or a
memorandum describing the contract with the county recorder prior to the
commencement of work. If a memorandum is used, it should describe
all of the parties involved in the contract, a description of the property,
a description of the work to be done, and the total amount to be paid under
the contract and under what terms. Failure to file the contract or
memorandum results in the parties providing labor or materials to the construction
project being presumed to have a lien for the value of the labor or materials
provided. C.R.S.§38-22-101.
Notice of Materials or Labor Furnished
Any party entitled to a lien, except the principal contractor,
may at any time give to the owner, or other person responsible for disbursing
funds, a written notice advising that the party giving the notice has provided
or will provide labor or materials to the project. This written notice
serves to advise the party funding the project that the party serving the
notice is entitled to be paid and is someone who could potentially file
a lien. The notice includes the estimated or agreed value of the
labor or materials that have been supplied or will be supplied. Properly
served, this notice requires the parties financing the construction project
to withhold the amount of value of these labor or materials from the principal
contractor to satisfy the claim or lien. C.R.S.§38-22-102.
Filing a Lien Statement
To file a lien, the party claiming the lien,
(the lien claimant), must file a lien statement in the office of the county
clerk and county recorder. Before a lien statement can be filed the
lien claimant must serve the property owner and principal contractor with
a notice of intent to file a lien at least ten days before the lien statement
is filed. C.R.S.§38-22-109(11).
A lien statement must contain the property owner's
name, if known, as well as the name of the lien claimant, and the contractor
for whom the lien claimant worked if the lien claimant is a subcontractor.
In addition, the notice must contain a property description and a statement
of how much the lien claimant is owed. C.R.S.§38-22-109(1).
Timely Filing of Lien Statement
Lien statements claiming payment for labor or
work by the day or piece must be filed within two months of the completion
of the project. Otherwise, the lien statement must be filed within
four months of the day the last work was performed or materials supplied
by the lien claimant. C.R.S.§38-22-109(4)
Filing a Notice of Intent to File a Lien
To extend the amount of time within which to
file a lien statement, the lien claimant may file with the county clerk
a Notice of Intent to File a Lien. This notice contains a property
description, the lien claimant's name, address and telephone number and
the name of the party the claimant has contracted with. The filing
of this notice extends the time the lien claimant may file a lien statement
to four months after completion of the project or six months after the
filing of the notice, whichever comes first. C.R.S.§38-22-109(4)-(10).
Duration of a Notice of Intent
A Notice of Intent to File a Lien automatically
terminates six months after filing. However, if improvements are
not yet complete, prior to termination of the notice the claimant may file
an amended notice and extend the notice an additional six months from filing
or four months from completion of the project. C.R.S.§38-22-109(10).
Duration of a Lien Statement
Regardless of when the lien statement is filed,
no lien statement shall remain effective longer than one year from filing
unless within thirty (30) days of the one year anniversary of the filing
the claimant files with the county recorder an affidavit stating that improvements
on the property have not been completed. C.R.S.§38-22-109(9).
Assignment of a Lien or Claim
It is possible for a lien claimant to assign
in writing his claim and lien to another party. That party then has
all the rights and remedies provided by law of the original lien claimant for
the purposes of filing and enforcing the original lien claimant's lien.
C.R.S.§ 38-22-117.
Satisfying a lien
After the lien has been filed, the property owner
may have the lien removed by paying the amount of the lien together with
the costs of filing and recording the lien. After payment, the property
owner may demand that the lien claimant file with the county recorder an
Acknowledgment of Satisfaction, which attests to the fact that the lien
has been satisfied. A lien claimant who does not file an Acknowledgment
within ten days of the property owner's request shall forfeit the amount
of $10.00 per day. C.R.S.§38-22-118.
Use of a Bond to Prevent the filing of a Lien
The Colorado statute that allows a party who
supplies labor or materials to place a lien on the improved property does
not apply where the principal contractor and his surety execute a performance
bond and a labor and materials bond, each in excess of 150% of the contract
price. Parties who would otherwise be entitled to a lien may pursue
the contractor and his surety directly, but must file suit within six months
of completion of the project. C.R.S.§38-22-129(2).
In order for a bond to prevent the filing of
a lien, the principal contractor must file a notice of the bond with the
office of the county recorder. The principal contractor should also
make copies of the bond available to subcontractors, materialmen, and laborers
upon request. C.R.S.§38-22-129(3)
It is possible for a lien claimant to file a
lien statement when the principal contractor has a bond in place.
If the contractor and surety execute a notice acknowledging the existence
of a bond and that the lien claimant is entitled to benefit from that bond,
the lien shall be deemed released. Under statute, if the property
owner requests that the contractor and surety execute an acknowledgment,
they must do so within thirty (30) days. Failure to execute the acknowledgment
within thirty (30) days will permit the lien claimant to file his lien
as normal. C.R.S.§38-22-129(4).
