Consolation position after tenure is denied
No, this is not common.  Someone denied tenure is generally allowed to stay in their current position for another year, to give some time to find a new job.  However, it's not standard to offer them a non-tenure-track job as a replacement.  Theoretically there's no reason they couldn't apply for such a job, but it sounds really awkward.  I imagine most people wouldn't want to stay in the same department in a lower status position, and the department wouldn't want them to either; I've never seen it actually happen.  When it does happen, I'd bet there's some compelling reason behind the scenes.  (For example, perhaps the lecturer in your department has a strong personal reason to want to stay in the area, and there are no other suitable jobs available.)