SRAttorneysLogoBlack&White&Color-04_edited.png

Construction Law: Contractors & Tradesmen

Lawyers Who Speak Construction

Whether you're an established GC, a start-up subcontractor, or a tradesman trying to get your name out there, you need to ensure you're legally protected at every stage of a project. While you may think you're saving money, it is significantly more cost effective to hire a lawyer before a project starts than it is to hire a lawyer to resolve problems after it goes south. Effective, tailored contractual provisions can protect contractors. If you find yourself in a dispute, or want to prevent one with a solid contract, reach out to us.

Construction Site

CDARA:

The Construction Defect Action Reform Act C.R.S. § 13-20-801, et seq. 

What is CDARA and how does it apply to construction professionals?

In Colorado, disputes involving construction professionals and claims for construction defects are governed by their own statute commonly referred to as CDARA. Unlike other types of disputes, the CDARA statute governs how and when construction disputes are litigated. The statute also requires property owners to follow a three part notice procedure to give contractors notice of work they claim is defective.

 

The Notice Process requires the property owner to (1) send a list of the claimed defects; (2) give the contractor 30-days to inspect the work; and (3) give the contractor 30 days to offer a remedy or resolution.  The purpose of this process is to protect contractors and give them the opportunity to inspect the work the property owner complains of before it is repaired and come to a resolution before the court becomes involved.  If the property owner does not comply with these steps or files a lawsuit before the time has expired, there are ways for a contractor to stay the case and ensure their right to inspect is protected. 

 

The CDARA statute has other provisions that affords other rights and protections on the parties, including: 

1. the statute of limitations; 

2. damages; 

3. negligence claims for building code violations; 

4. liability;

5. insurance, among others. 

If you are involved in a dispute with a property owner are regarding your work, don't go it alone. Having an attorney who is well-versed in construction law and CDARA is the best tool for the job. Our firm has a team of civil litigators that are well versed and practiced in these areas, call us for a consult to discuss your case. 

MECHANIC'S LIENS:

C.R.S. § 38-22-101 et seq.

What is a Mechanic's Lien and How Does it Help me Get Paid? 

A mechanic's lien is an important and powerful tool in Colorado for construction professionals. The purpose of this statute? To get contractors and construction professionals paid for work or materials they provided to a property. 

In Colorado, mechanic's liens are governed by statute which outline how and when a lien can be filed. It is crucial that the conditions and regulations be precisely followed for a lien to be valid. If they are not followed, the lien may be unenforceable and could actually put the lien filer in a worse position than before. 

Before filing a lien based on what you think is right, or based on what you googled online, reach out to an attorney to make sure you are following all the rules. Our firm is well practiced in filing and pursing mechanic's liens and other measure to get those paid for work performed. 

Image by Kostiantyn Li
Crane lifting on construction site

How Does a Mechanic's Lien Get Me Paid? 

10 Ways a Lien Gets You Paid:

1. Creates pressure on those in charge;   
2. Encumbers the Property; 
3. Puts the lender on notice; 
4. Escalates and prioritizes your debt; 
5. May entitle you to attorneys fees, costs and higher interest rates; 
6. Gets the property owner's attention; 
7. Causes the owner to breach other contracts;;
8. May affect bond of contractor; 
9. Affects the projects funds; and
10. Affects relationships. 
 

 

The primary way a mechanic's lien gets you paid, is the effect liens have on the project and owners. A valid mechanic's lien creates leverage in favor of the construction professional and puts pressure on the property owner or general contractor. 

A mechanic's lien is a security interest, much like a mortgage, in real property and any construction improvements on the real property. Filing a mechanic's lien puts a black mark on the property and means a property owner must clear, or pay, your lien when dealing with construction loans, financing or selling the property. 

The lien gets the attention of the right people and puts them on notice that you are unpaid. It gets the attention of the construction lend and may affects how money can be spent on the project, in some cases forcing payment to keep the project moving. Property owners are affected by the filing of a mechanic's lien because it affects their ability to finance or sell their property. It also likely causes them to be in breach of agreements with other parties that require them to keep the property free and clear of liens. 

Image by Sven Mieke

TRUST FUND STATUTE: Theft by Colorado Contractors. C.R.S. § 38-22-127 

What is the Colorado Trust Fund Statute and What do I Need to Know as a Contractor?

In many construction project, a contractor is paid in advance for labor and materials.  In these situations, a contractor can be sitting on a large sum of money from the property owner who expects the contractor to use those funds only on their project. 

In Colorado, the Trust Fund Statute establishes certain duties and requirements a contractor who is holding the property owners money must comply with.  Failure to comply with these requirements can lead to severe consequences that include attorney fees, costs and treble (or triple) the amount of damages for stolen money. A contractor may be subject to both criminal and civil charges for violations of this statute. 

The Trust Fund Statutes states that a contractor must hold "in trust" contracted funds for use to pay the subcontractors and materialmen who contributed to the construction project. The purpose of this statute is to ensure that the projects costs are being paid by funds by the contractor holding the funds and prevent situations where the property owner is forced to pay for costs twice or faced with liens on their property. 

A contractor may find themselves in violation of the Trust Fund Statute if they used contracted funds for: 
1. general business operation and overhead expenses; 
2. on other unrelated projects; or 
3. personal expenses. 

Those found guilty under theses claims are not only open to pay treble the amount of stolen funds, but cannot seek relief under a bankruptcy filing because these claims are by law non-dischargeable under bankruptcy. 

A typical trust fund statute violation arises, where the contractor is paid for project funds that must be held in trust. At some point, a property owner receives notice from a subcontractor or supplier claiming they are unpaid for their work and demand money or a mechanic's lien will be filed against their property. A homeowner then files suit against the contractor claiming they violated the trust fund statute and are seeking repayment of three times the amount of the unpaid sum plus their attorney fees and costs. 

Knowing the rules and requirements under the Trust Fund Statute is an important first step in protecting yourself and your company.  If you are unsure or need help defending against claims for violating the Trust Fund Statute contact us for a consultation. 

DISPUTES WITH PROPERTY OWNERS: 

How do I Resolve a Dispute and How do I Avoid them in the Future?

Disputes with property owners are inevitable. How to handle disputes and prevent them in the future may require advise from an attorney. Issues that may arise include disputes over: 

1. payments, 
2. scope of work & change orders, 
3. contract terms and provisions, 
4. timeline for completion, 
5. construction defects & property damage, 
6. punch lists, 
7. materials, 
8. cost overruns & unexpected costs
9. unexpected delays, 
10. warranties & liability. 

Contractors can protect themselves by first having a proper contract that defines the rights and responsibilities of the parties.  Not all disputes can be avoided, if you find yourself in a dispute and aren't sure how to handle the situation both before a lawsuit is filed, contact us for a consultation. Our firm is founded on the idea of providing upfront and honest case assessments. 

Hammers on Rack