Construction projects come in many shapes and sizes. Some are private jobs commissioned by property owners. Others are public projects commissioned by states, counties, municipalities or the federal government. Sometimes, there are even private projects commissioned to be performed on public property, which may present a mechanics lien conundrum.
This blog post talks about a very frequently encountered construction project: those commissioned by tenants or lessees. The post specifically discusses what mechanics lien remedy is available in Colorado (because, of course, each state treats this differently).
This tenant situation arises in a number of ways, with these as some of the more common:
- Development of strip malls or shopping malls. Tenants typically rent these spaces and must develop the space themselves;
- Many commercial buildings are rented on a triple net basis, such that a tenant must perform all repairs and improvements on the property;
- Residential tenants oftentimes commission repairs or small improvements to a property they don’t own.
What happens in these instances? May a Colorado contractor or supplier file a mechanics lien against the property and the property owner’s interest if the property owner had nothing to do with contracting for the work?
In Colorado, the answer is usually yes.
There are two categories of Colorado mechanics liens. One is referred to as the Section 101 mechanics lien, and this is what contractors and suppliers file when the work is commissioned directly by the property owner. If, on the other hand, the work is commissioned by a tenant, the filing is referred to as a Section 105 mechanics lien.
For all intents and purposes, the two types of mechanics liens are identical. The exception is simply that under the Section 105 mechanics lien, the property owner can avoid liability and crush the mechanics lien rights on the project.
To do so, property owners must post a “notice of non-liability” within 5 days of becoming aware that construction is being performed at the site. If this notice is not posted or posted late, the property is subject to the mechanics lien. Fortunately for potential claimants, these notices are very often overlooked. Usually, therefore, contractors and suppliers have perfect and full mechanics lien rights when working on a Colorado construction project commissioned by a tenant.