Mechanics lien – attorney fees and excessive liens

The Colorado mechanics lien statute limits the lien of any person to the value of laborers, machinery, tools, or equipment supplied, or services rendered.  A contract can establish what the parties, property owner and contractor, agreed was the value of construction work and supplies.”The contract price is a good indication of the value of the goods and labor entitled to the lien. Independent Trust Corp. v. Stan Miller, Inc., 796 P.2d 483, (Colo. 1990).

It is a good idea for a property owner to record the construction contract in the office of the county clerk and recorder where the property is located, because that limits the size of any potential lien to the amount of the contract.  If the contract is not recorded, a contractor, or a subcontractor, may seek to lien the property for the full value of labor or materials provided, and that might be more than the contract amount.  This could happen where costs of construction go up while the project is underway, and the owner and contractor dispute who should pay the extra costs.

The Colorado mechanics lien statute also says any person who files a lien for an amount greater than is due without a reasonable possibility that the amount claimed is due and with the knowledge that said amount claimed is greater than that amount then due, … 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. The obvious intent of the statute is to penalize lien claimants who abuse the mechanic’s lien process.  In a case where several lawsuits between the contractor, property owner, and subcontractors were directly attributable to the contractor’s giving of notice, or the filing, of a lien claim, the trial court awarded the owner all of the attorney’s fees incurred incident to the excessive claim. Heating and Plumbing Engineers, Inc. v. H.J. Wilson Co., Inc., 698 P.2d 1364, (1984).  In the Heating and Plumbing case, the court found that the benefit conferred on the property by the contractor was worth only $180, and that the contractor’s mechanic’s lien claim was, and was known to be, excessive at the time it was filed. Based on those findings, the trial court denied the contractor’s claims except for the allowance of $180 on a unjust enrichment basis, and entered a judgment against it for $65,754 in attorney’s fees and $354.60 in costs incurred by the owner.  Ouch!

If you need a Colorado construction law attorney, please give us a call.