Fraudulent or Retaliatory Mechanics' Liens in Colorado
Mechanic’s liens are powerful tools. When used correctly, they protect contractors and suppliers who have genuinely improved a property. But in Colorado, some contractors misuse lien rights as a weapon. Instead of securing payment for legitimate work, they record liens to punish homeowners, exert leverage in a billing dispute, or force payment for defective or incomplete work.
The pattern is familiar. A homeowner questions the quality of the work, asks for proof of permits, or refuses to pay for extras outside the written contract. Rather than addressing those concerns, the contractor responds with threats: “If you don’t pay, I’ll lien your house.” In some cases, the contractor goes further and records a mechanic’s lien that bears little resemblance to the reality of the project. The lien might demand full contract price even though the job was left half-finished, include charges for materials never delivered, or appear only after the homeowner has raised serious defect complaints.
A recorded lien can feel devastating. It clouds title, can derail a pending sale or refinance, and shows up in public records as if it were an established truth. But recording a lien does not automatically make it valid. Colorado’s lien laws impose strict requirements and meaningful consequences when a contractor files a lien that is knowingly false, inflated, or retaliatory.
If you are new to the topic, it may be helpful to start with Understanding Mechanics Liens in Colorado: A Homeowner’s Guide and then return to this article to evaluate whether the lien you’re facing may cross the line into fraud or retaliation.
How Colorado Law Treats Wrongful or Inflated Liens
The Colorado mechanic’s lien statute, C.R.S. § 38-22-101 et seq., allows a lien only for the value of labor, services, and materials that actually improved the property. The contractor must have a genuine basis for claiming payment, must comply with strict deadlines, and must verify the lien under oath. When a contractor knowingly misstates the amount, includes work never performed, fabricates material charges, or files a lien after abandoning the job, those acts can make the lien invalid and potentially expose the contractor to liability.
Many fraudulent or retaliatory liens share the same hallmarks. The amount claimed bears no relationship to the remaining contract balance. The lien appears only after the homeowner reports significant defects or demands code-compliant work. The contractor includes future work that was never performed or charges tied to change orders the homeowner never approved. Sometimes the contractor adds legal fees, penalties, or other categories of damages that Colorado’s lien statute does not permit.
These problems often overlap with issues explored in Mechanic’s Liens for Overbilling or Inflated Invoices and How Much Can a Contractor Claim in a Mechanic’s Lien?. When the numbers on the lien are plainly untethered from the reality of the job site, that is usually a sign that something is wrong.
For statutory background, homeowners can review the text of Colorado’s mechanic’s lien provisions through the official Colorado General Assembly site: Colorado Revised Statutes – Mechanic’s Liens, C.R.S. § 38-22-101 et seq..
Retaliatory Liens and the Abuse of Lien Leverage
Retaliatory liens arise from motive as much as math. A contractor may file a lien not because there is a serious payment dispute, but because the homeowner has insisted on quality, safety, or contractual compliance. When a homeowner demands that defects be corrected, asks for inspection approvals, or refuses to pay for unauthorized upgrades, some contractors react by weaponizing the lien process.
This misuse is especially apparent when the timing of the lien is calculated to maximize harm. A contractor may wait until the property is under contract to be sold, then record a lien days before closing. Others file immediately after a homeowner posts an honest online review or files a warranty claim. In these scenarios, the lien itself becomes a form of retaliation rather than a neutral security interest.
Courts look at both substance and context. A lien that is late under Colorado’s strict deadlines, that is plainly overstated, or that is tied to work the contractor botched or never completed is vulnerable even before motive is examined. Our article How Long Does a Contractor Have to File a Mechanic’s Lien? explains why timing alone often defeats improper liens.
Consequences for Contractors Who File Fraudulent Liens
When a lien is shown to be knowingly false, exaggerated, or filed without any good-faith basis, Colorado courts have several remedies available. They can declare the lien invalid and order its removal from the property’s title history. They can award attorney fees and costs to the homeowner who was forced to fight off the wrongful lien. In particularly egregious cases—such as where the contractor clearly knew the lien was false when it was recorded—courts can award damages for slander of title.
Because fraudulent liens almost never exist in isolation, homeowners frequently discover that the same contractor also performed unpermitted work, abandoned the project, or failed to hold required local licenses. Those issues are explored more fully in What to Do When a Contractor Files a Lien for Incomplete Work and Can an Unlicensed or Non-Permitted Contractor File a Mechanic’s Lien?. The more layers of misconduct exist, the weaker the lien becomes.
Practical Steps for Colorado Homeowners Facing a Suspect Lien
The starting point in any fraudulent-lien case is careful review. The recorded lien should be examined for basic statutory compliance: deadlines, verification under oath, identification of the property and owner, an accurate statement of the amount claimed, and consistency with the underlying contract and payment history. Many defective liens fail on the surface. Others crumble once project documentation—emails, texts, invoices, change orders, inspection reports, and photographs—is assembled.
Homeowners also need a practical plan for dealing with the cloud on title. If there is no imminent sale or refinance, the immediate focus may be on building the legal case to have the lien invalidated and shifting leverage back to the homeowner. If a closing is scheduled or refinancing is underway, time pressure may make it necessary to use a lien bond or similar mechanism to remove the lien from title while the dispute continues. Our article on How Colorado Property Owners Can Bond Around a Mechanic’s Lien explains how that process works and when it makes sense.
Because improper liens often intertwine with broader construction-defect and consumer-protection issues, it rarely makes sense for homeowners to address them in isolation. A coordinated strategy frequently involves challenging the lien, asserting the homeowner’s own claims for defective or incomplete work, and evaluating possible remedies under Colorado’s consumer and homeowner-protection statutes.
When It Makes Sense to Involve a Lawyer
Contractors who are willing to record fraudulent or retaliatory liens are seldom reasonable negotiating partners. They have already demonstrated a willingness to misuse legal tools to gain leverage. In that environment, homeowners are better served with experienced counsel who can analyze the lien, assess statutory defenses, and pursue removal and damages where appropriate.
A lawyer focused on Colorado construction and lien law can help a homeowner turn a fraudulent lien from a source of fear into a liability for the contractor who filed it. For many homeowners, the first step is simply understanding that a recorded lien is not the final word—and that the law provides robust remedies when lien rights are abused.
The information provided on this website is for general informational purposes only and should not be construed as legal advice or legal opinion. You should not act or refrain from acting on the basis of any information provided on this website without seeking legal advice from an attorney.