A recent decision by the Colorado Court of Appeals in Weize Co., LLC v. Colorado Regional Const., Inc., impacts the right of mechanic’s lien claimants under the Colorado General Mechanic’s Lien law, C.R.S. §§ 38-22-101, et seq.

The general mechanic’s lien law allows mechanics, materialmen, contractors, sub-contractors, builders and all persons performing the labor or furnishing materials used in construction or improvements to property to assert a mechanic’s lien against the property where the work is performed or materials are delivered.  An owner or a general contractor may file a corporate surety bond equal to 150% of the amount of the mechanic’s lien to discharge the property from the lien.  The “bonding” of the mechanic’s lien allows an owner the flexibility to re-finance any obligations on the property and “clear” the property of any claims required by the lender or title company.

In order to recover on a mechanic’s lien, a claimant must file a lawsuit to foreclose on the property with a Notice of Commencement of Action, or Lis Pendens.  The owner or general contractor may file a corporate surety bond equal to 150% of the amount of the mechanic’s lien with the court and discharge the property from the lien.  Upon approval of the bond, the clerk of the district court will issue a certificate of release discharging the property from the lien and from the lis pendens.

The court in Weize found that even where a bond is posted in advance of any foreclosure action, the claimant will still need to record a lis pendens against the property in order to enforce the lien.  The court reasoned that the absence of a lis pendens could mislead any potential purchaser or lender into believing that there were no liens or claims against the property.  Moreover, the surety bond is not the equivalent of a payment or performance bond so the surety could become insolvent restricting the claimant’s right of recovery against the bond.  Accordingly, owners, principal contractors, materialmen, sub-contractors, builders and all persons performing labor or providing materials should be aware that even if a surety bond is posted, a lis pendens may still be necessary to perfect a lien.

 For more information, please contact one of the members of the Construction Law Group at Folkestad Fazekas Barrick & Patoile, P.C. at 303-688-3045.

Written by Aaron Barrick, Esq.