Mechanic’s liens can be highly effective tools for contractors to get paid for their work. At the same time, mechanic’s liens carry risk for those who knowingly record a lien for an amount greater than what is due. One who overstates the amount of a mechanic’s lien forfeits his lien rights and may be liable for the other side’s costs and attorney’s fees. Because failure to follow the rules can have serious consequences, it is important to hire an experienced attorney before filing a lien or when an owner receives notice that a lien will be filed.
Colorado law requires that a mechanic’s lien include only the amount that is “due” at the time the lien is filed. In Honnen Equipment Co., Inc. v. Never Summer Backhoe Service, Inc. (July, 2011), the Colorado Court of Appeals addressed the question whether filing a lien statement that includes interest constitutes an amount greater than what is due.
The Court held that because lien claimants are entitled to receive interest on a lien claim under the statute (C.R.S. § 38-22-101(5)), inclusion of the accrued interest in the lien itself, as opposed to claiming it as part of a lien foreclosure lawsuit, does not render a lien excessive.
The lesson for contractors is that interest may be included as part of a lien amount. The lesson for lien claimants in general is that one must be vigilant in accurately calculating a lien amount. Make sure the job–cost accounting records underlying any lien are accurate before you lien the job, and get experienced legal advice to make sure you follow all the rules.