We published an article last year about the mechanics lien rights for those companies who specially fabricate materials. The article – Special Mechanics Lien Rules for Specially Fabricated Materials – explains what usually qualifies as a “specially fabricated material” and outlines rules that exist in states who have addressed the issue. We’ve updated the post last week to add treatment in Colorado (thanks Stevan Baxter) and New York (thanks Vincent Pallaci). This post specifically discusses a ruling from Colorado that sets forth the rule in that state.
Why Specially Fabricated Materials Create A Mechanics Lien Conundrum
Every state has some type of mechanics lien statute and differences are abound, but every state has the same underlying purpose for the statute: to protect those furnishing labor or materials to the improvement of property. The general principle is that if one party provides something to improve the value of another party’s property, the furnishing party should be compensated. If they aren’t compensated, they are protected by the lien rights.
The rules in every state must draw lines as to who and what is protected by these lien laws, and almost universally, the laws require that the furnishing must actually be incorporated into the property to qualify for protection.
Specially fabricated materials present an unique problem, however. While uncommon, the circumstance does occur when a party orders materials, those materials are specially fabricated to fit within the customer’s building, and then, before installation, the order is cancelled. Can the material fabricator file a lien even though the materials aren’t actually incorporated into the project?
Each state has a different answer. Some states, in fact, have no answer at all. In Colorado, even though the legislature has not chimed in on the issue and embedded a rule into the law, the courts have drawn a conclusion based on the overarching purpose of the lien statutes.
Colorado Mechanics Lien Can Be Filed For Uninstalled Fabricated Materials
Quite some time ago (1987), the Colorado Division One Court of Appeals was called upon to solve this exact problem in Ragsdale Bros Roofing, Inc. v. United Bank of Denver, N.A. (744 P.2d. 750).
The Colorado court was assisted by the very liberal Colorado statute, which provides that anyone who has furnished labor, materials, or services “to be used in construction of the building” has a mechanics lien right. As you can see from the statutory text there is no actually requirement that the furnishings are used…just that they are “to be used.” C.R.S. § 38-22-101(1).
Relying on this and the liberal purpose of the lien remedy, the court held that a party could file a mechanics lien for specially fabricated materials even if it wasn’t actually installed, so long as the materials were delivered to the owner at some point and were furnished “to be used” in an improvement. Here is their exact reasoning:
We agree with the trial court and find that Corneau-Finley furnished the fireplace glass doors and screens within the meaning of the statute since they were custom-made for the structure and, therefore, not of general value to Corneau-Finley. HN11Go to the description of this Headnote.It is not necessary for a lien claimant to show the materials furnished were actually used in the structure against which the lien is sought…
However, we are aware the purpose of the mechanics’ lien statute is to permit a lien upon premises only to the extent that the benefit has been received by the owner…Therefore, we modify the trial court’s judgment by adding the requirement that Corneau-Finley must deliver the fireplace doors and screens to United Bank.
For more resources on the lien laws in Colorado see levelset’s Colorado Mechanics Lien Resources.