If there is a performance bond for our job do I need to move forward with the lien process or does the bond offer us the same protection the lien would in this case.
1 reply
Dec 30, 2019
It's not exactly common for a privately-owned construction project to be bonded. However, if a Colorado contractor provides payment and performance bonds at the start of the job, then the project property will not be subject to mechanics lien claims.
Instead, claimants who could otherwise file a mechanics lien will be entitled to bring a claim directly against the general contractor and the surety for amounts owed but unpaid. And, the deadline for making such a claim is 6 months from the last work on the project.
If you'd like to read the relevant statute, you can find it here: CRS § 38-22-129. For more on payment bonds and private projects: Payment Bonds on Private Construction Projects.
How to make payment bond claim on a private project in Colorado
If a bond claim does ultimately become necessary, the steps for making a claim are a little different.
First, for smaller claims of $2,000 or less, a claimant must provide a notice of their claim to the GC and their surety of the impending claim. The claimant must send an affidavit and all relevant documentary evidence that they performed work and went unpaid for that work, and the documentation should also support the amount of the claim being made. Then, the surety will have 45 days to either pay the claim or dispute it. This notice must be served by certified or registered mail, personal delivery, or by leaving a copy of the notice at the applicable place of business with some person in charge.
If the claim exceeds $2,000, the above-described notice won't be necessary. Instead, a claimant could proceed directly to suit against the contractor and bond. Of course, it's still probably a good idea to send a notice of the claim anyway in order to avoid having to pursue a lawsuit.
Even if mechanics lien claims aren't available, it's a good idea to send notice
First, it's a good idea to send a preliminary notice on every job, even if it's not required. Preliminary notices create transparent, collaborative, and communicative projects - and that helps to avoid payment issues regardless of any lien-preservation function to the notice.
It's also worth noting that sending warnings or even threats as a payment dispute escalates is a good idea, too. Even if certain notices, warnings, or threats aren't required - they can help to get paid. So, using tools like invoice reminders, demand letters, and Notices of Intent to Lien can still be valuable, regardless of what's required.
What's more, to preserve Colorado lien rights, a Notice of Intent to Lien is required. It's not immediately clear, per the statute, whether a Notice of Intent to Lien must be sent to preserve the right to make a payment bond claim - but it's likely still a good idea to play it safe and send a Notice of Intent, as usual. And, sending the notice to all relevant parties - like the owner, GC, and surety - can help to notify others of the payment dispute and push toward a resolution of the issue.