Ordinarily contractors, subcontractors and material suppliers wishing to file mechanic's liens in Colorado have four months following the date of their last work or from when they last furnished materials in which to file their lien statements in the public records.
However, when the project involved is a single or double-family residence, slightly different rules and times apply. The time for the filing of the mechanic's lien is shortened in some instances. Rather than the four months mentioned above, such a lien claimant must file his lien in the public records no later than two months following completion of the residential unit. Section 38-22-125, C.R.S.
By statute, "completion" is defined as the earlier of the date of actual completion or the sale and occupancy of the residential property to a bona fide purchaser who has no knowledge of the fact that money is owed to a lien claimant. . The lien claimant's filing time may be extended if, within one month after completion or before conveyance (transfer of title), whichever is later, a written notice extending the time for lien filing is filed in the office of the Clerk and Recorder of the county where the property is located.
The purpose of this shortened-time provision is to reduce the risk of new home buyers of having their homes liened. To some extent it also reduces the risks of their lenders and of the companies who provide title insurance protection.
Suppliers, contractors and subcontractors involved in this type of residential work must use extreme caution in monitoring their accounts receivable if they expect to rely upon their mechanic's lien rights. They must also recognize that at least ten days before they file their lien statements they are required to serve written notice of their intent to file liens upon both the general contractor and the residence owner.
Thus, these possible lien claimants may have no more than one month and nineteen days in which to act to establish lien claims, failing which their only recourse is against their customer and without lien protection.
Construction-related businesses would be well-advised to establish procedures which will provide adequate time to perfect lien claims in the event of non-payment. The shortened time for lien action on single and two-family residences makes these procedures even more important - particularly to those whose materials or labor are furnished in the latter stages of construction since their lien time expires earlier in relationship to the time of completion of their work.