Page 28B—
COLORADO REAL ESTATE JOURNAL
—
September 2-September 15, 2015
T
he American
Arbitration
Association recently
revised its Construction
Industry Arbitration Rules
and Mediation Procedures.
The revised Rules, effective
July 1, send a clear message:
Arbitration should be a faster,
cheaper and more efficient
alternative to court litigation of
complex construction matters.
Parties who ignore this may feel
the force of arbitrators’ newly
enhanced sanction powers.
Parties who fail to learn the
newly revised rules could miss
important opportunities to
shape the issues, scope and
costs of the proceedings.
n
Mediation.
Mediation is
required for cases with claims of
$100,000 or more. Mediation,
by default, will happen
concurrently with arbitration.
Potential benefits of this
include reduced preparation
costs, fewer scheduling issues,
and a venue for efficiently
disposing or smaller, collateral
claims just before the hearing.
Drawbacks might include a lost
opportunity to resolve matters
early in the proceedings and a
chilled negotiating atmosphere
given the proximity to the
hearing. If the concurrent
mediation issue makes parties
uncomfortable, Rule 10
allows them to agree to other
timelines and procedures,
or to opt out of mediation
completely.
n
Consolidation and
joinder time frames and filing
requirements streamlined.
General contractors or owners
may want to act promptly
and utilize these rules to
gain control over a potential
multiparty, multitier dispute.
Also, it may make sense and
save costs to agree to allow
the Rule 7 arbitrator to act
as a merits arbitrator, or to
act as the mediator later in
the proceedings, since that
person will already have some
familiarity with the issues in the
case.
n
Preliminary hearing.
At
the discretion of the arbitrator,
and depending upon the
size and complexity of the
matter, a preliminary hearing
is to be scheduled as soon
as practicable following the
C
ontractors, owners
and banks use lien
waivers to control the
risks associated with mechanic's
liens. A mechanic's lien is a
statutory interest that someone
can assert in another person's
property to secure the payment
for improving that property.
A lien waiver abandons the
right to claim a lien, either in
whole or in part, on a particular
piece of property. A partial
lien waiver, for example, could
waive the right to lien for work
performed on a past month's
invoice. This would not waive
the right to assert a lien for
other unpaid work in the
future, or since the time the
invoice was generated. A full or
final lien waiver, on the other
hand, waives all rights to assert
a mechanic's lien for any work
performed.
Colorado's mechanic's lien
law exists to secure payment
of those who improve real
property. (Seracuse Lawler
& Partners Inc. v. Copper
Mountain, 654 P.2d 1328, 1330
[Colo. App. 1982]). Even so,
Colorado court will enforce
lien waivers if the waivers meet
minimum criteria.
First, a lien waiver must
be clear and unambiguous.
(Bishop v. Moore, 323 P.2d
897 (Colo. 1958); Ragsdale
Bros. Roofing, Inc. v. United
Bank of Denver, 744 P.2d 750
[Colo. Ct. App. 1987].) The
lien waiver must show the
clear and specific intent to
waive lien rights. (See Bishop,
supra.) If the lien waiver can
reasonably be interpreted in
more than one way the waiver
is ambiguous. (See Hecla Min.
Co. v. New Hampshire Ins. Co.,
811 P.2d 1083, 1091 [Colo.
1991; see also Bishop, supra.])
A lien waiver that is ambiguous
will be interpreted to waive
only the rights associated with
the payment actually made
in return for the waiver, but
all other lien rights remain
preserved. (Ragsdale Bros.
Roofing, Inc. v. United Bank of
Denver, 744 P.2d 750 [Colo. Ct.
App. 1987].)
Second, a lien waiver must
be supported by consideration.
(Western Fed. Sav. & Loan
Ass'n v. National Homes Corp.,
445 P.2d 892, 897-898 [Colo.
1968]; see also In re Woodcrest
Homes, Inc., 15 B.R. 886, 888
[D. Colo. 1981].) This typically
means the person or party
signing the lien waiver must
be receiving a bargained-for
benefit in return. (See Western
Fed. Sav. & Loan, supra at
897.) Some might think that
payment of a contractor's or
subcontractor's invoice will
suffice as consideration for
a lien waiver, but that is not
always the case.
For example, lien waivers
printed on the backs of checks
given to pay subcontractor
invoices may not be enforceable
if those lien waivers are not
otherwise supported by
consideration. (See generally,
In re Woodcrest Homes,
supra [held that the lien
waivers in that case were
supported by consideration].)
If a contractor already has a
contractual obligation to pay it
subcontractor, the making of
that payment is considered a
pre-existing obligation and does
not constitute consideration for
the lien waiver, except as to the
amount of the payment actually
received. (See Ragsdale Bros.
Roofing, Inc. v. United Bank
of Denver, 744 P.2d 750 [Colo.
Ct. App. 1987]; see generally
Lucht's Concrete Pumping, Inc.
v. Horner, 255 P.3d 1058, 1062
[Colo. 2011][recognizing that
performance of pre-existing
obligation does not constitute
consideration]; see also 3
Williston on Contracts § 7:36
[4th. Ed.][2015.])
If, however, the contract
with the subcontractor states
that the subcontractor must
sign lien waivers to receive
payment, then this constitutes
a reciprocal bargain (the
contractor has bargained
for the lien waiver and the
subcontractor has bargained
for the payments and the award
of the subcontract itself) and
the lien waivers are therefore
supported by consideration.
(See Western Fed. Sav. &
Loan Ass'n of Denver v. Nat'l
Homes Corp., 445 P.2d 892,
897-98 [1968][Consideration
is measured as of the time of
making the contract and need
not be of equal value to the
right given up in exchange];
see e.g., Steveco, Inc. v. C&G
Inv. Assoc., 1977 WL 200326
[Ohio case stating that lien
waiver provision in original
contract was supported by
the consideration for the
contract itself and required no
independent consideration.])
As another example, if a
lender agrees to lend further
money to complete a job that
has gone over budget due to
change order, and the lender
requires lien waivers with each
pay application as part of its
agreement to lend the extra
money, the agreement to
lend more money suffices as
consideration to enforce those
lien waivers. (See Western Fed.
Sav. & Loan, supra.)
Risks exist beyond the issues
of ambiguity and consideration.
Signing a lien waiver still can
have serious consequences
that may prevent you from
successfully asserting a lien
claim. For example, an owner
who relies on the lien waiver
of a subcontractor in making
payment to the general can
prevent the subcontractor from
successfully asserting a lien.
The legal concept behind this is
called estoppel, and it basically
binds the subcontractor to
the lien waiver to prevent
an unfair surprise to a third
party who relies upon that lien
waiver. Lenders or higher-tier
contractors also can assert
estoppel defenses based upon
a signed lien waiver from a
third party if they rely to their
detriment on that lien waiver.
(See Mountain Stone Co. v.
H.W. Hammond Co., 564 P.2d
958 [Colo. 1977].)
Another potential risk of
signing a lien waiver is that
it may contain additional
provisions, such as waivers of
other claims. Signing a claim
waiver like this could prevent
you from seeking a change
order for delays or other
impacts. The waiver form might
also include a warranty that you
have paid all of subcontractors
or suppliers in full and might
require you to indemnify the
owner if your suppliers or
subcontractors make claims. In
short, read what you are signing
and call your attorney if you
have doubts.
Finally, understand that your
lien rights belong to you. No
one can waive them on your
behalf and you cannot waiver
the lien rights of others without
their consent. (Aste v. Wilson,
59 P. 846 (Colo. Ct. App.
1900).)
Daniel C. Wennogle
Attorney, Stinson Leonard Street
LLP, Greenwood Village
Daniel C. Wennogle
Attorney, Stinson Leonard Street
LLP, Greenwood Village
