Can a Contractor Waive its Mechanic’s Lien Rights in Colorado?

Mechanic liens are an effective tool used on construction projects of all sizes by contractors to ensure payment for their work. When a mechanic’s lien is foreclosed, the Court will order that the property where the work was completed be sold, and the contractor will be paid the lien amount from the proceeds of the sale. This ensures that there is a source of funds for payment to contractors on projects where the owner may have run out of money to finish the project. Accordingly, contractors must be sure that they do not unsuspectingly waive their mechanic’s lien rights through their contracts. While this article references construction contracts between owners and general contractors, these principles apply to all construction contacts, including those between a general contractor and subcontractor and subcontractors and material suppliers.

The general rule is that contractors can waive their mechanic’s lien rights before the project has even begun. C.R.S. 38-22-119(1) provides “[n]o agreement to waive, abandon, or refrain from enforcing any [mechanic’s lien] shall be binding except as between the parties to such contract.” Therefore, a contractor’s waiver of the mechanic’s lien rights must be included in a written contract with the owner for the construction project. Without written agreement, a contractor cannot waive its mechanic’s lien rights.

In addition to having to be in writing, a waiver of a contractor’s mechanic’s lien rights must be explicit. This rule intends to protect contractors and preserve their mechanic’s lien rights. When ambiguity exists, courts have been reluctant to enforce the mechanic’s lien waiver but rather construe the waiver in favor of the lien. Bishop v. Moore, 323 P.2d 897 (Colo. 1958). Finding ambiguity in a mechanic’s lien waiver provision may be one way a contractor can preserve its mechanic’s lien rights despite contractual provisions.

The ability of a contractor to enforce its mechanic’s lien rights could mean the difference between getting paid and taking a loss on a construction project. Therefore, before signing a construction contract, you want to be sure that you are not waving or limiting your mechanics lien rights. Our construction law attorneys are here to help review your construction contract and ensure you are not limiting your rights before the project begins. Contact our office today to schedule a consultation.

This blog is intended to provide general information and, therefore, should not be treated as legal advice. You should contact a qualified attorney for questions about legal issues.