SB 26-074 Signed Into Law: Clarifying Excessive Claims and Expanding Protections for Lien and Bond Claimants in Colorado

Construction hard hat next to computer

On May 30, 2026, Governor Jared Polis signed Senate Bill 26-074 (SB 26-074) into law. Unless a referendum petition is filed, the new law is scheduled to take effect on August 12, 2026. The bill, titled “Concerning Clarification of the Penalty for Claiming an Excessive Amount in a Public Construction Performance Bond Dispute,” codifies and expands on the Colorado Supreme Court’s landmark decision in Ralph L. Wadsworth Construction Company, LLC v. Regional Rail Partners, 2026 CO 19 (April 6, 2026), and makes significant changes to both Colorado’s Mechanics’ Lien Act, C.R.S. §§ 38-22-101 et seq., and Public Works Act, C.R.S. §§ 38-26-101 et seq.

Colorado Mechanics’ Lien Act and Public Works Act provide important protections for construction contractors, subcontractors, and suppliers but in different contexts. Generally, the Mechanics’ Lien Act provides payment protection on private projects while the Public Works Act provides payment protection on public projects. Both are key to understanding the full panoply of, and changes to, contractors’, subcontractors’, and suppliers’ payment rights and protections on construction projects in Colorado. SB 26-074 affects both Acts and is discussed below.

The Wadsworth Decision

The Wadsworth case arose from the $343 million North Metro Rail Line RTD project. Ralph L. Wadsworth Construction Company filed a verified statement of claim1 for approximately $12.8 million, which included delay and disruption damages. The Colorado Court of Appeals found the claim to be excessive and held that Wadsworth had forfeited all remedies, both statutory and common law.

The Colorado Supreme Court reversed the Court of Appeals decision, holding:

  1. Disputed or unliquidated amounts (including delay and disruption damages) may lawfully be included in a verified statement of claim under the Public Works Act, provided they constitute labor, materials, sustenance, rental machinery, tools, equipment, or other supplies used in the performance of the work.
  2. Purely consequential damages (such as lost profits and idle time) do not fall within the statutory categories and may not be included in a verified statement of claim.
  3. The penalty for filing an excessive claim under the Public Works Act is forfeiture only of statutory rights and remedies under the Public Works Act, not all legal remedies available to the claimant. For instance, even if a claim is excessive under the Public Works Act, a contractor does not forfeit its contract claims.

SB 26-074 Codifies and Expands Wadsworth

SB 26-074 makes parallel amendments to both the Mechanics’ Lien Act and the Public Works Act. The new law makes several key changes:

Key Changes to the Mechanics’ Lien Act (C.R.S. § 38-22-101, C.R.S. § 38-22-128)

  • Disputed or Undisputed Amounts (C.R.S. § 38-22-101(1) (Amended)): The statute now expressly provides that the value of labor and materials covered by liens includes amounts “whether disputed or undisputed.” This eliminates any argument that a lien must be limited to undisputed sums.
  • Delay and Disruption Costs (C.R.S. § 38-22-101(7) (New)): A new subsection explicitly states: “Nothing in this article 22 prohibits the inclusion of costs otherwise allowed under a contract in a lien, including costs incurred as a result of delay, lost productivity, or other disruption to the work.”
  • Good Faith Standard for Excessive Claims (C.R.S. § 38-22-128(2) (New)): A court award of less than the lien amount does not render the lien excessive if the person had a good faith basis2 to believe the lien amount was due at the time of filing.
  • Definition of “Due” (C.R.S. § 38-22-128(3) (New)): The statute defines “due” as follows: “[A]n amount is ‘due’ if a person reasonably believes, in good faith, that the amount represents the value of the labor, services, equipment, or other materials or persons furnished or supplied to a contractor . . . whether or not the amount is unliquidated or disputed.”

Key Changes to the Public Works Act (C.R.S. § 38-26-107, C.R.S. § 38-26-110)

  • Expanded Coverage (C.R.S. § 38-26-107(1) (Amended)): The statute now adds “equipment” and “services” to the types of items covered by verified statements of claim. It also adds language that amounts may be claimed “whether the amount is disputed or undisputed” and expressly states that nothing prohibits the inclusion of delay, lost productivity, or disruption costs.
  • Limited Forfeiture (Codifying Wadsworth) (C.R.S. § 38-26-110(1) (Amended)): The forfeiture language is amended from “all rights to the amount claimed” to “all rights to the . . . verified statement of claim.” This directly codifies the Wadsworth holding that forfeiture of statutory rights under the Public Works Act does not extinguish all legal remedies.
  • Good Faith Standard (C.R.S. § 38-26-110(2) (New)): A court award of less than the verified statement amount does not render the claim excessive if the claimant filed in good faith.
  • Definition of “Amount Due” (C.R.S. § 38-26-110(3) (New)): Mirrors the Mechanics’ Lien Act definition: an amount is “due” if the person reasonably believes, in good faith, that it represents the value of labor, materials, equipment, or services furnished, “whether or not the amount is unliquidated or disputed.”

The Pay-if-Paid Implications: The “Amount Due” Definition

SB 26-074 introduces a statutory definition of “amount due” (or “due”) under both the Mechanics’ Lien Act and the Public Works Act. The definition ties what is “due” to the value of labor, materials, equipment, and services furnished, rather than to amounts due under a contract with reference to conditions precedent or owner payment.

This definition may affect how pay-if-paid clauses interact with lien and bond claims. A “pay-if-paid” clause is generally understood as a contractual provision under which a general contractor’s obligation to pay a subcontractor is expressly conditioned on the general contractor’s receipt of payment from the project owner for the subcontractor’s work – the owner’s payment operates as a condition precedent to the subcontractor’s right to receive payment. However, SB 26-074 defines what is “due” for lien and bond claim purposes based on the value of work performed, potentially independent of whether contractual payment conditions have been satisfied.

The interplay between this statutory definition and contractual pay-if-paid provisions remains subject to interpretation. The Wadsworth court distinguished between disputed amounts and conditions precedent that the claimant knows are unsatisfied, citing Byerly v. Bank of Colorado. This could suggest that knowledge of unsatisfied conditions may still be relevant in determining whether a claim is “excessive.”

Ultimately, courts may interpret the “good faith belief” standard with reference to underlying contract terms, including pay-if-paid clauses. How this statutory framework applies to situations where contractual payment conditions remain unsatisfied is an open question that will likely require future judicial interpretation.

Summary

SB 26-074 and the Wadsworth decision together represent a significant shift in Colorado construction law, particularly as it relates to lien and bond claims. Parties should work with legal counsel to review current contract templates, pay-if-paid provisions, and claim practices in light of these developments. Contractors and subcontractors should understand both the expanded protections and remaining limitations before the new law takes effect on August 12, 2026.

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1Verified statement of claim: Under the Colorado Public Works Act, §38-26-107, C.R.S., a claimant seeking payment for labor, materials, equipment, or services furnished on a public project must file a verified statement of the amount due and unpaid with the public entity or contracting officer. The statement must be filed within the time periods specified by statute and serves as the foundation for a bond claim against the contractor’s payment bond.

2Good faith basis: Under SB 26-074, an amount claimed in a lien or verified statement is not rendered “excessive” merely because a court ultimately awards less than the claimed amount, provided the claimant had a “good faith basis” to believe the amount was due at the time of filing. SB 26-074 defines “due” as an amount the person reasonably believes, in good faith, represents the value of the labor, services, equipment, or other materials furnished, whether or not the amount is unliquidated or disputed.