Commentary: Understand the Two Different Types of Mechanics Liens
In Colorado there are two types of mechanic’s liens, and understanding the difference between them is critical for both owners and contractors. One type provides for mechanic’s lien remedies to those who supply labor, materials, services and other lienable benefits for the improvement of property, under contract with a property owner or the owner’s agent. We will call that a “Section 101” lien—the section of the Colorado mechanic’s lien statute that creates the remedy.
The other lien type arises when construction work is contracted by someone other than the property owner (for example, a tenant) and when the owner fails to post or serve notice that its property will not be liable for mechanic’s liens. Those notices must be given no later than five days after owners become aware that lienable work is being performed on their properties. That lien may be called a “Section 105” lien, again referring to the applicable section of the Colorado mechanic’s lien statute.
Section 101 liens are obviously the most common because they arise from owners contracting to have construction or construction-related work performed. Design professionals, contractors, and contractors’ suppliers, subcontractors, rental companies, laborers and others have lien rights because they have added value to the owners’ properties at the owners’ requests.
On the other hand, Section 105 mechanic’s liens do not result from owners having contracted to have work done on their properties. Instead, these liens may be the result of owners knowing that construction work is being done on their properties but failing to take timely action to alert potential lien claimants that their properties will not be subjected to mechanic’s liens. Typically, that involves tenants having construction work done in their rental spaces.
Owners who do not contract for work must either post or serve notices of the non-liability of their properties for mechanic’s liens. Posting is the most desirable because owners are not likely to be able to identify all of the parties performing work or supplying materials and services. Those notices must be posted on the property or served within five days after the owners become aware that construction work is being performed on the property.
The language of a notice of non-liability should include:
• A legal description and address of the property,
• The name of and signature by and on behalf of the owner, and