Construction material, equipment and fixture suppliers are eligible to assert mechanic's liens against construction projects in which their materials had been used. Careful attention to mechanic's lien rights by suppliers is likely to assure that they will be paid.
There are, however, special rules applicable to suppliers. First, they must be able to show that their materials were used in the project liened. Second, they must prove that they sold the materials with the intent that they be used in that specific project. Third, the supplier must furnish materials to someone who is providing labor on the project. We now separately consider these requirements.
Use of particular materials on a project means just that-almost. Under Colorado law, a materialman has lien rights against the project if his materials were used (incorporated) into the work or if the materials were specially fabricated for a particular project, but not used although through no fault of the materialman. Thus, if the supplier can establish that the nails, the toilets or the whatever he sold were actually used in the construction, he meets this particular requirement. An example of a materialman's success in asserting a mechanic's lien even if his materials were not used was a case involving a steel fabricator that provided specialty steel for a project which was not used only because the concrete columns in which the specially-fabricated steel was used were miscast by the precaster.
Use on a particular project may sometimes be difficult to establish. There are a number of Colorado cases which hold that delivery to the jobsite is sufficient to establish use of the materials in the project. Another Colorado case even holds that the supplier was entitled to a lien after having delivered to the jobsite, even though his materials were removed and used on another job.
1 Kobayaski v. Meehleis Steel Co., 28 Colo. App. 327, 472 P.2d 724 (1970).
2 The Trane Co. v. Cherry Hills 111 Dev. Corp., 588 P.2d 884 (Colo. App. 1978).
3 B.F. Salazar Lumber Co. v. Lindenmeier, 54 Colo. 491, 131 P. 442 (Colo. 1913).
F-52 Another important aspect of use is that the materials, equipment or supplies be actually incorporated into the work as distinguished from merely placed on the project and easily removable. Thus, cases have held that a supplier of refrigerators or stoves of the plug-in type were not entitled to mechanic's lien protections since they furnished removable personal property not physically incorporated into the work.
The intent of the supplier at the time the materials are sold is also critical. The supplier must sell with the intent that his materials are for a particular project. Otherwise, the supplier cannot assert a lien even on a project where he can prove his materials were used. Thus, materials and supplies sold as "truck stock" or on "shop" accounts and to be used by the customer on various projects indiscriminately will not entitle the supplier to mechanic's lien rights.
This intent is required on the theory that a supplier is entitled to a lien because he sold materials relying on the credit of the project; that is, he sold knowing that if he would not be paid, he could claim mechanic's lien rights.
The second-tier material supplier is one who sells materials to a materialman rather than a subcontractor or contractor also furnishing labor. This second-tier material supplier does not appear to be entitled to mechanic's lien rights under the language of the Colorado statute. For example, an equipment manufacturer who sells to a supply house would not have lien rights unless the supply house also provided labor for installation.
To protect his lien rights, the material supplier should:
-Identify the project for which materials are being purchased and have the project name and address clearly reflected on sales documents;
-Carefully document delivery to the project;
-Sell only to subcontractors or contractors whose forces are performing labor on the project;
-Take special care to obtain signed receipts for materials by responsible persons;
-Persons receipting for materials should be required to both sign and print their names so that they can be identified later, if necessary for trial;
-Document as thoroughly as possible-maintain a complete paper trail of the transaction;
A construction material supplier should be well-protected against credit risks by establishing and following appropriate procedures for protection of his mechanic's lien rights.