Page 56 - CCD Magazine - Winter-Spring 2019 Issue

Construction Law Colorado’s Mechanics’ Lien Laws by Matthew S. Rork Matthew S. Rork Fairfield and Woods, P.C. The Colorado mechanics’ lien statutes codified at C.R.S. §38-22-101 et seq. apply to private sector residential and commercial construction. Public works projects are covered by a separate statutory scheme. The substantive and procedural requirements for perfecting, litigating, and foreclosing mechanics’ liens are the same for both residential and commercial projects with limited exceptions. This article focuses on the nuances between residential and commercial construction projects. HOMEOWNER PAYMENT DEFENSE In 1987, the Colorado General Assembly enacted a defense designed to prevent homeowners from paying twice for a new home or for improvements to an existing home. C.R.S. §38-22-102(3.5). The statute provides an automatic and complete affirmative defense against all mechanics’ lien claims. This defense is available to owners of existing homes who contract for improvements, homeowners who contract for the construction of a new home, and purchasers of newly constructed homes. All that is required is that the homeowner’s contractual obligations are paid in full before any liens are filed, or mechanics’ liens will attach to the residence. BONA FIDE PURCHASER DEFENSE The bona fide purchaser defense provided in C.R.S. §38- 22-125 applies to single or double family residences. It imposes more stringent requirements to perfect lien rights than the homeowner payment defense. Where a purchaser of a single- or double-family dwelling is involved, the lien must be recorded within two months of completion or conveyance of the residence to a bona fide purchaser, whichever is first. The three exceptions to this time limit include: 56 | Colorado Construction & Design 1. At the time of conveyance the purchaser had knowledge of the amounts due and owing to the claimant; or 2. The lien was filed before conveyance to the purchaser; or 3. A notice of extension of time to file a lien statement was recorded within one month after completion of construction or conveyance to the purchaser, whichever is later. If an exception applies, then the general timelines set forth in the mechanics’ lien statutes are applicable. NOTICE OF NON-LIABILITY Tenant improvements and buildouts are typical in commercial leases. In Colorado, a landlord/owner with knowledge of construction, alterations, or repairs to leasehold premises by a tenant is deemed to have requested them and their fee interest is vulnerable to mechanics’ liens for unpaid services or materials. A landlord/owner can protect itself if within five days after learning of such updates, it posts and keeps posted at the leasehold premises a written notice that its interests shall not be subject to any mechanics’ liens. If this is done, then any mechanics’ liens will attach only to the tenant’s leasehold interest. No such notice needs to be posted by a mortgage lender with a deed of trust. RECORDING OF GENERAL CONTRACT The project owner always runs the risk that labor and/ or material suppliers retained by the contractor will not be paid for the work performed and will file mechanics’