Chapter 2 - § 2.5 PRIORITY AND RANKING OF LIENS

• Jurisdiction: Colorado

§ 2.5 PRIORITY AND RANKING OF LIENS

§ 2.5.1—Priorities

Relation Back Doctrine

All liens established by virtue of Colorado's mechanics' lien statute relate back to the time of the commencement of work under the contract between the owner and the first contractor.¹¹³ Preliminary design services constitute "commencement of the work upon the structure or improvement" for purposes of priorities.¹¹⁴

Preference for Work on "Entire Structure"

Mechanics' liens also sometimes have a preference (or "super-priority") with respect to the improvements for which the labor or material were provided.

When the lien is for work done or labor or material furnished for any entire structure, erection, or improvement, such lien shall attach to such building, erection, or improvement for or upon which the work was done, or laborers or materials furnished in preference to any prior lien or encumbrance, or mortgage upon the land upon which the same is erected or put, and any person enforcing such lien may have such building, erection, or improvement sold under execution and the purchaser at any such sale may remove the same within thirty days after such sale.¹¹⁵

This "super-priority" only applies to new construction, and does not apply to expansions, repairs, or remodeling of existing improvements.¹¹⁶ But if the lien claimant has performed work for an "entire structure," then the lien claimant's lien has preference, as to the structure only, to any prior lien or encumbrance, or mortgage on the land.¹¹⁷ "Thus, a properly filed mechanics' lien becomes the prior lien upon the new structure, while an existing deed of trust remains the prior lien upon the land."¹¹⁸

"However, there is an exception to the rule that mechanics' liens have priority on a newly-constructed building."¹¹⁹ Specifically, "mechanics' liens are not entitled to priority under § 38-22-103(2) over a pre-existing deed of trust expressly intended to secure a loan for construction if (1) the deed is recorded prior to attachment of the mechanics' liens and (2) the loan proceeds are used for construction purposes."¹²⁰ "This exception grants the lien of the deed of trust priority insofar as the purpose of the loan was for building the structure and the proceeds were actually used for that purpose. . . ."¹²¹

Specifically, in Joralman, our supreme court held:

Where mechanics and materialmen have notice of the existence of a mortgage which is given expressly for the purpose of securing funds to construct an improvement,

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