Colorado

Lien Law Overview

In Colorado, lien rights for residential construction are addressed in the same statute that addresses all mechanics lien rights. See Colo. Rev. Stat. § 38-22-101. Government-type properties are covered under the Colorado Public Works Act and have different requirements than non-public projects.

Colorado has one of the most liberal relation-back doctrines in the country. All mechanics’ liens for a project relate back in time and take priority as of the date of commencement of the first work under the contract between the owner and the first contractor and, if not in writing, to the date of the first work on the structure or improvements. Colorado courts have considered the architect’s commencement of plans, surveyor’s commencement of work, and delivery of materials as the date of first work. Consequently, lenders should note that physical inspection of the property will not conclusively determine whether work has commenced.

The lien claimant must file a mechanics lien within 4 months of the lien claimant’s last work on the property. C.R.S. §§ 38-22-109, and a lien foreclosure action must be filed within 6 months of the earlier of any party’s last work on the improvements or completion of the improvements. C.R.S. §§ 38-22-110. In addition, the lien created by the recording of a mechanics lien will automatically expire one year from recording unless either (i) an action to enforce the lien has been commenced within the time frame set forth above or (ii) within 30 days after the annual anniversary of recording, an affidavit is recorded confirming that the improvements on the subject property have not been completed. C.R.S. §§ 38-22-109(8).

House Bill 21-1167
Colorado’s mechanics lien laws are extraordinarily contractor-friendly and became increasingly so in 2021 with the passage of House Bill 21-1167. Owner or lender retainage from contractors or subcontractors is now limited to no more than 5% of the completed work being billed, and payment to a given party can only be conditioned on delivery of lien waivers if such condition is expressly stated in the agreement with such party.

House Bill 21-1167 adds a new article (46) to the statute under title 38. This new section of the statute (House Bill 21-1167) does not apply to:
A single contract that governs the building of either:

• One single-family dwelling, or
• One multifamily dwelling with no more than four family dwelling units, or
• A contract with a public entity, as defined in section 24-91-102 (3)

Owner Protection for Payments Made
An owner (or some person acting on the owner’s behalf) who makes payments to the principal contractor or any subcontractor for the purpose of payment to the subcontractors or suppliers of laborers, materials, or services to the job – and those payments are in an amount sufficient to satisfy the contractual and legal obligations of the owner, including the initial purchase price or contract amount plus any additions or change orders- has an affirmative defense in any lawsuit to enforce a lien on the following types of property:

• Existing single-family dwelling unit,
• Residence constructed by the owner or under a contract entered into by the owner prior to its occupancy as the owner’s primary residence; or
• The property is a single-family, owner-occupied dwelling unit, including a residence constructed and sold for occupancy as a primary residence. This paragraph shall not apply to a developer or builder of multiple residences except for the residence that is occupied as the primary residence of the developer or builder.

Lien Waivers

Lien Waiver Summary

No agreement to waive, abandon, or refrain from enforcing any lien is binding except as between the parties to the contract. An agreement to waive lien rights must contain a statement, by the person waiving lien rights, providing in substance that all debts owed to any third party by the person waiving the lien rights and relating to the goods or services covered by the waiver of lien rights have been paid or will be timely paid.

Are title companies required by law to manage construction loan disbursements?

No, but title companies are insurance companies that may require -in exchange for insurance coverage – some level of control over how loan proceeds are disbursed. If they do, the lender either must comply with the title company’s demands or risk not having coverage for the loan (or try another title company, but they tend to share best practices by location/region).

Can a mechanics lien have priority over a pre-existing mortgage in Colorado?

Mechanics liens in Colorado have a “super-priority,” making them an effective payment tool for those providing labor and materials to improve real property. A mechanics lien for work or materials for an entire structure (new construction as opposed to remodeling or addition work) is generally superior to a prior purchase money deed of trust on the improvements, and so much of the land as is necessary for the convenient use and occupation of those improvements. C.R.S. ⸹ 38-22-103(2). The only exception applies to a construction deed of trust that expressly and correctly “recites its purpose as a construction loan, is recorded before the mechanics liens, and only to the extent that the proceeds from the loan were ‘used for construction purposes.'” 1st Choice Bank v. Fisher Mech. Contrs., Inc., 15 P.3d 1100 (Colo. App. 2000), cert. denied, 2001 Colo. LEXIS 2 (Jan. 16, 2001).

Preliminary Lien Notifications

In Colorado a lien claimant may send a preliminary notice under C.R.S. § 38-22-102. The preliminary notice is sent to:

• The owner
• The superintendent of construction
• The agent
• The architect
• The financing institution or other person disbursing funds

Upon giving the notice, it is the duty of the person who contracted with the principal contractor to “withhold from such principal contractor . . . sufficient money due or that may become due to said principal contractor . . . to satisfy such claim and any lien that may be filed. . . .” This language is often referred to as a “trapping lien,” because the funds that will become due are trapped and must be paid to the party sending the notice.

Notice of Completion

Not applicable.

Contractor Licensing

Contractor Requirement: Colorado does not require general contractors to be licensed at the state level, but local city or county governments typically impose general contractor licensing requirements. Colorado requires certain trades, including plumbers (Colo. Rev. Stat. § 12-155-101) and electricians (Colo. Rev. Stat. § 12-115-101) to be licensed.

Colorado imposes penalties for unlicensed work for the trades that require a license. For violations by plumbers, penalties include citations and fines from $1,000 for the first offense and up to $2,000 for each day of a violation for subsequent offenses. Colo. Rev. Stat. § 12-155-123.

In Colorado, a contractor that supplies labor, machinery, tools, or equipment to be used in the construction, alteration, or repair of any structure has mechanics lien rights, regardless of licensure. Colo. Rev. Stat. § 38-22-101.

Subcontractor Requirement: Electrical and Plumbing contractors must be state licensed.

Contractor Warranties: Implied warranty for breach of contract violations. 3 yr statute of limitation. Can be after that, but no later than 6 yrs, if homeowner could not have reasonably known about the defect. (e.g. mold inside walls caused by defect).

Contractor License Search
For licensed professionals – architects, electrical contractors, engineers, landscape architects, surveyors, etc.
For all others that are not required to be licensed

Contractor Requirements