What is a mechanics lien?

Posted by: Mar 06, 2016By Brian Stutheit

A mechanics lien is a right established in Colorado statutes which allows certain persons to assert a claim against privately owned property as security for payment for labor or materials on that property.  A proper mechanics lien operates much like a mortgage or deed of trust.  The holder has a right to foreclose and force sale of the property to satisfy the lien.  A mechanics lien foreclosure action is actually somewhat more involved than a typical mortgage foreclosure where much of the process in handled by the county clerk.  A mechanics lien foreclosure process is more like a lawsuit.

A contractor or material provider can file an enforce a lien against any real property if its labor or materials enhanced the value or improved the property.  Even if the lien claimant had no contract with the property owner, he may enforce a lien against the property.  The theory is that the property owner should not be unjustly enriched by the work or supplies which enhance the property.  However, the work or materials must have been done or supplied at the instance of the owner or the owner’s agent.   A general contractor, architect or other person in charge of owner approved construction is probably the owner’s agent.

Because lien rights are created by statute, a person claiming a lien must follow the statute strictly.  The manner set out in statute for claiming a lien and the time limits on filing the lien and foreclosing must be followed for the lien to be enforced. However, any filed lien can impair use and value of property, whether or not the lien may be enforced.  Mechanics liens can damage property value, even if the lien is not foreclosed.  Title companies will not insure properties with a lien on them, so it is hard to sell the properties.  Having a lien on the property is often a violation of the owner’s deed of trust, and can be treated as a default on the mortgage.

Savvy owners or construction lenders typically withhold final payment on construction projects until they receive lien waivers.