Mechanic’s Liens: Notice of Non-Liability

Under Colorado law, landlords are provided a procedure for the protection of their property interests against mechanic’s liens resulting from work done at the request of their tenants. This may be accomplished through the landlord’s giving written notice of non-liability.

The applicable Colorado statute provides that if, within five days after the landlord learns of construction work on his property, he posts a written notice of non-liability in a conspicuous place on the property and keeps that notice posted throughout the duration of the construction, his property will be protected against mechanic’s liens. Alternatively, he may give copies of the written notice personally to anyone working or supplying equipment or materials for use in the construction within that time limit provided.

The statute is designed to afford protection for the landlord only if he gives potential mechanic’s lien claimants adequate notice so that they can otherwise protect themselves in the event of non-payment. The statutory scheme is a little shortsighted when considered in light of the fact that equipment and material suppliers may not necessarily visit the jobsite where they would learn of the landlord’s notice.

Potential mechanic’s lien claimants are not denied all protection under these provisions. They continue to have the opportunity to secure their claims with mechanic’s liens against the tenant’s interest in the property, i.e. the tenant’s leasehold interest.

For example, a supplier who has furnished materials used for improvement of tenant spaces in a shopping center may not, if it had been properly posted, have lien rights against the shopping center real estate itself. However, if he properly perfects his mechanic’s lien, he will be able to foreclose against the tenant’s interest-the lease.

A tenant who has expended substantial dollars to complete, fixture and advertise his business in a particular shopping center is not likely to give up his leasehold rights to a mechanic’s lien claimant. Even the landlord who has properly posted his property may have an interest in retaining his tenants rather than having a mechanic’s lien claimant take their place.

1 Section 38-22-105(2), C.R.S.

F-32 A recent Colorado Court of Appeals decision 2 ruled that a 1andlord who had posted but who had failed to keep his property posted throughout the construction period was nevertheless entitled to protection against the mechanic’s lien by a lien claimant who actually knew that the property had been posted with a notice of non-liability. This suggests that court would liberally construe the posting provisions.

This landlord protection method may pose some problems to contractors and suppliers involved in tenant work. While it does not eliminate mechanic’s lien rights entirely, involved businesses should monitor their tenant work carefully to understand the limitations upon their mechanic’s lien rights. Deliverymen and workmen should be cautioned to report any posted notices on jobs.

On the other hand, landlords should be aware that they have some protection against mechanic’s liens.

Keep this wrinkle in the mechanic’s lien law in mind. It might save many dollars.

2 Uni-Build Corp. v. Colorado Seminary, 650 P.2d 1300 (Colo. App. 1982).