Serving a preliminary notice is typically the most important step in preserving your lien rights. In most states, failing to deliver a preliminary notice to the property owner is equivalent to relinquishing your right to file a valid mechanics lien.
Unlike most states, Colorado does not require potential lien claimants to serve a traditional preliminary notice. The only pre-lien notice required in Colorado is the Notice of Intent to Lien, but construction participants with no direct contract with the owner may still serve a preliminary notice or a Notice to Owner if they choose to do so.
This step-by-step guide explains the process for serving a preliminary notice in Colorado.
Who must serve a preliminary notice in Colorado?
No construction participant is required to serve a preliminary notice in Colorado. However, parties with no direct contract with the property owner may choose to serve a preliminary notice, also called the Notice to Owner.
Note that there is another pre-lien notice in Colorado – the Notice of Intent to Lien – and it is different from a traditional preliminary notice. Unlike a Notice to Owner, the Notice of Intent to Lien is required to be submitted by all lien claimants in Colorado.
Why serve a Colorado preliminary notice?
1. It promotes visibility in a project.
Lower-tier parties who have no direct contact with an owner are essentially “invisible” to a property owner, especially in higher-tier parties. It is difficult to establish communication lines between parties who may not know each other, but serving a preliminary notice bridges this gap and allows a subcontractor or a material supplier to be visible to owners in a project.
2. It prompts an owner to withhold payment from the general contractor.
In Colorado, serving a Notice to Owner actually has the legal effect of getting the property owner to withhold payment to the general contractor until the party who sent the preliminary notice has been paid. Serving the preliminary notice therefore allows you to be in a better position during payment negotiations, especially if you are dealing with a difficult general contractor.
3. It may speed up the payment process.
Payment processes will go much quicker if parties are able to communicate with each other and if property owners are aware of which parties are working on their project. When you serve a preliminary notice, property owners will know that you need to get paid or else you will record a mechanics lien. This can be enough to get them to ensure that you get paid right on time.
When do you serve a Colorado preliminary notice?
There is no hard-and-fast deadline for serving a Colorado preliminary notice. It may be sent before or after commencing work on a project, but definitely before serving the Notice of Intent to Lien prior to recording the mechanics lien itself.
What happens if you fail to serve a Colorado preliminary notice?
You will retain your lien rights even if you do not serve a Colorado preliminary notice. This notice is optional, so your basic right to lien will not be affected if you choose not to serve it.
How to serve a Colorado preliminary notice
1. Prepare the Colorado preliminary notice form
Colorado does not have specific formatting requirements for the preliminary notice. In general, the following details must be gathered and included on your Colorado preliminary notice form:
- Your (claimant’s) name and address
- The name and address of the party who hired you
- A statement saying that you will furnish services to the project
- A description of services provided or to be provided
- A reasonable estimate or the agreed value of the services
2. Serve the preliminary notice on the owner
After preparing the preliminary notice form, you may serve the preliminary notice on the property owner via personal delivery. Personally delivering the preliminary notice is the most recommended method.
You may also leave the preliminary notice at the property owner’s place of residence or office by handing it to their agent, construction superintendent, or another person in charge.
Note that in terms of deadline, there are no specific time frames for serving the Colorado preliminary notice. You may serve it before starting work on a project. You may also serve it after you have started working on a project but before serving the Notice of Intent to Lien and filing a mechanics lien.
Note that the preliminary notice is considered served once it has been received by the property owner or their agent.
Best practices for serving a Colorado preliminary notice
1. Serve a Colorado preliminary notice, even if not required
A Colorado preliminary notice can get a property owner to withhold payment from the general contractor and directly give you your payment. It is an optional preliminary notice but it is a very powerful preliminary notice, so long as you serve it properly. You are therefore strongly encouraged to serve a preliminary notice, even if you are not legally mandated to do so.
2. Do not overestimate the amount for your services
The preliminary notice in Colorado must include an estimate of the price of your services or your exact contract amount. Do not try to bloat this amount, and always write a reasonable estimate for the labor or materials that will provide or have provided to a project. You may be subjected to penalties if you try to extort a larger sum of payment via a preliminary notice.
3. Record a Colorado mechanics lien if non-payment occurs
A preliminary notice is typically served at the beginning of a project before any payment dispute comes up. If non-payment occurs and you need to recover your hard-earned money from a difficult client, it is best practice to file a mechanics lien.
Note that before you record a valid Colorado mechanics lien, you must first serve a Notice of Intent to Lien on the owner. Unlike the preliminary notice, the Notice of Intent to Lien must be served by all potential claimants looking to record a mechanics lien.
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