Chapter 9 - § 9.2 BONDS TO RELEASE RECORDED MECHANICS' LIENS

• Jurisdiction: Colorado

§ 9.2 BONDS TO RELEASE RECORDED MECHANICS' LIENS

Under the mechanics' lien laws in Colorado, once a mechanics' lien has been recorded, the lien may be released by the filing of an appropriate bond. C.R.S. § 38-22-131 provides the procedure for substituting a bond and releasing the mechanics' lien. Under this statute, the owner or general contractor⁴ (or perhaps other obligated party) may obtain the release of a mechanics' lien by procuring a bond "in an amount equal to one and one-half times the amount of the lien plus costs allowed to date."⁵ Once the bond is obtained, the procedure for posting the bond and releasing the lien involves the filing of a motion with the court. The bond is presented to the district court for review. If the bond is found to be acceptable and in compliance with the requirements of the statute, the court will accept the bond and issue an order discharging the lien. In order for the bond to be approved, it must contain a condition that

if the lien claimant shall be finally adjudged to be entitled to recover upon the claim upon which his lien is based, the principal or his sureties shall pay to such claimant the amount of his judgment, together with any interest, costs, and such other sums which such claimant would be entitled to recover upon the foreclosure of the lien.⁶

After the bond has been filed with the court and approved, the lien against the designated property will be discharged and released by a court order. This process also requires a certificate of release signed by the clerk of the district court. The certificate of release is then recorded with the county clerk and recorder's office to reflect the release of the mechanics' lien.⁷ Thereafter, if a subcontractor or other party elects to proceed to foreclose on its lien rights, it must do so in an action guided by the other principals of mechanics' lien laws, but it will seek recovery against the bond rather than against the property. All other aspects of a mechanics' lien foreclosure action apply, including the six-month time limitations in C.R.S. § 38-22-110 for filing of suit.⁸

Often, when a bond is to be substituted for a lien, that process occurs before a lawsuit has been filed. However, there are certainly times when the decision to bond around and release the lien occurs after a lawsuit has commenced. Although there is no statutory provision that speaks specifically to the issue of substituting a bond in place of the mechanics' lien statement where suit has...