Kudos to the Vail Valley Blogsite for a recent article about a frequently asked question regarding how lien claimants should calculate the amount of its mechanics lien claim. We’ve written about this topic in a general sense in the post: What Costs Can I Include in a Mechanics Lien.
What’s great about the Vail Valley post, however, is that it’s super specific to Colorado law, and discusses a specific case on the topic: Honnen Equipment Company, Inc. v. Never Summer Backhoe Service, Inc. This case, decided in July 2011, addresses an attempt by a property owner to invalidate a Colorado Mechanics Lien based on C.R.S. § 38-22-128, which states that anyone who overstates a lien forfeits their lien rights and may be liable for the owner’s costs and fees in having the lien removed.
In Honnen Equipment, the property owner argued that by including late charges and interest in the mechanics lien, the lien claimant “overstated” the lien amount, as C.R.S. § 38-22-101(1) only allows a party to lien for the “value of the services rendered or labor performed and materials furnished.” The interest and/or late charges is not the value of the services.
Thankfully for mechanic lien claimants all across Colorado, the appeals court disagreed. However, it’s important to read the opinion in full and understand why they disagreed, because in some situations, Colorado law will still disallow the inclusion of late charges and other costs and expenses in a mechanics lien claim!
Huh? Let’s let the Colorado appeals court explain:
The intent of section 38-22-128 is to punish and deter those who abuse the mechanic’s lien statute by knowingly and intentionally claiming excess amounts that are totally unrelated to the construction project. See Wigham Excavating Co. v. Colo. Fed. Sav. & Loan Ass’n, 796 P.2d 23, 25 (Colo. App. 1990)…This is especially so when the inclusion of the excess amount has the potential to deceive the parties for whom the statutory notice is required. Wigham, 796 P.2d at 25.
…Homestead argues that because the term “`amount due’ in section 38-22-128 necessarily incorporates the type of work for which a mechanic’s lien may be claimed,” Wigham, 796 P.2d at 25, and because accrued interest is not “related to the `value of . . . services rendered or labor done or material furnished'” as set forth in section 38-22-101(1),” Independent Trust Corp., 796 P.2d at 490, knowingly including accrued interest automatically renders an entire lien excessive as a matter of law. We disagree, and conclude that because lien claimants are “entitled to receive interest” under section 38-22-101(5), C.R.S. 2010, accrued interest can be an “amount due” under section 38-22-128.
This court opinion, while favorable to mechanic lien claimants and positively resting on the “intent” of §38-22-128, is very specific to accrued interest, and does not address of cost and expense types. Therefore, lien claimants should still be very, very careful when calculating their lien amount. While this case may make Colorado mechanic lien claimants more comfortable adding interest to the lien amount, they should remain uncomfortable adding other cost and expense types to their lien.