Chapter 3 - § 3.2 LIEN WAIVERS

• Jurisdiction: Colorado

§ 3.2 LIEN WAIVERS

Lien waivers frequently come into play on construction projects during the payment process and when collection efforts are required to recover funds due to a contractor, subcontractor, or supplier. A waiver has been defined as "the intentional or voluntary relinquishment of a known right."⁴ The application of this principle to the waiver of lien rights and claims under the Colorado mechanics' lien statutes has been consistently applied to mean that any waiver of the statutory right to file a lien must be clear and unambiguous. In Bishop v. Moore, the Colorado Supreme Court said:

In the absence of language clearly indicating an intention to waive a lien it is not to be supposed that the contractor intended absolutely to relinquish his statutory right to claim one. Where the terms of the contract, or the evidence offered in support of the alleged waiver of the right to claim a lien are ambiguous the doubt must be resolved against the waiver. A mechanic's lien may be waived by express agreement of the party in whose favor it exists.⁵

Lien waivers are addressed in the mechanics' lien statutes and are described as effective, but only between the parties to such an agreement. C.R.S. § 38-22-119(1) states as follows:

No agreement to waive, abandon, or refrain from enforcing any lien provided for by this article shall be binding except as between the parties to such contract. The provisions of this article shall receive a liberal construction in all cases.

An interesting case that discusses the required express agreement to waive is General Growth Development Corporation v. A & P Steel, Inc.,⁶ where the court considered a bank's effort to impose a waiver on a subcontractor through a lien subordination clause. There the court said:

Chase is not a party to the subcontract and cannot bind A & P thereto. Even if it could, I do not find the clause constitutes a valid waiver under the statute. The Colorado courts allow waiver only by express agreement of the party in whose favor the lien exists, by "language clearly indicating an intention to waive a lien."⁷

On a construction project, a contractor or subcontractor may be expected to sign a waiver at the time of a progress payment or final payment. Often, the contract or subcontract describes the payment procedures applicable to the process and dictates the use of specific lien waiver forms. The party receiving payment should carefully review the contract terms and lien waiver form to make sure that the language is appropriate, that the lien...