It’s a Duck, or Is It? Perfecting Non-Payment Claims on Quasi-Public Property

Contractors and suppliers face legal ambiguity when they encounter non-payment on a project that includes both public and private components. Under Colorado law, the mechanisms for securing payment differ for private and public projects—but what about projects that include some of both? What if it quacks like a duck and walks like chicken?

For construction work on private property, the Colorado Mechanic’s Lien Statute provides that a claimant may record a mechanics lien and foreclose on the lien, if necessary.  C.R.S. §§ 38-22-101, et seq.  But mechanic’s liens on public property are prohibited, in order  “to preserve essential public services and functions while protecting those who benefit from public services and facilities.”  City of Westminster v. Brannan Sand & Gravel Co., Inc., 940 P.2d 393, 395 (Colo. 1997).

For construction work on public property, the Colorado Public Works statute provides a different means for a claimant: a lien against dispersed construction funds. See Fladung v. City of Boulder, 165 Colo. 244, 252, 438 P.2d, 688, 692-93 (1968). Principal contractors on public projects must provide bonds to ensure payment to subcontractors and suppliers. Unpaid claimants are entitled to file a verified statement of claim directly with the owner, creating a lien on undisbursed construction funds.  C.R.S. §§ 38-26-101, et seq.

However, in some situations, it is not clear whether a project is private or public, and a claimant may be unsure whether to file a mechanic’s lien or a verified statement of claim. Under these circumstances, the claimant must sometimes look beyond the status of the underlying real property and even behind the contractual relationships on the project, to determine how to perfect security for a claim.

For example, a project might be owned by a private, non-profit organization, but the underlying property may be owned by a public entity, or the project may be funded, in whole or in part, by public funds.  In such situations, it becomes a dispute over fact—which must be determined by a trial—as to which statutory scheme applies. By the time this disputed fact is revealed in a lawsuit for non-payment, it may be too late to perfect a statutory claim.

In situations where both private and public entities might be involved, it is necessary to analyze the specifics to determine whether to perfect a mechanic’s lien against the property and/or the improvements; or to file a verified statement of claim with the owner; or, potentially, both.  And there may be other steps possible to protect a claimant’s rights.