- December 8, 2022
- Posted By:hmvreeland
If an individual fails to compensate their contractor or supplier for services rendered, the professional can place a lien or mechanic’s lien on the customer’s property. If a mechanic’s lien is placed on your property, you can obtain a mechanic’s lien release bond to remove the lien.
A mechanic’s lien release bond, also referred to as lien discharge bond or release of lien bond, is a type of Surety bond. It transfers the lien from the property to the bond. That said, the property owner is still financially liable to the lien claimant, but with a release of mechanic’s lien bond in place, the property owner can sell or refinance their property, whereas without the bond, the lien halts title transactions for a period of time.
How Does a Mechanic’s Lien Release Bond Work?
If a property owner believes that the lien placed against their property has been satisfied or should not have been placed, they can purchase a release of mechanic’s lien bond. If the lien holder files a lawsuit and the court determines that the lien was valid, a claim can be made against the lien release bond if the owner does not satisfy the amount due. The Surety pays and then collects the payment amount plus any legal or other expenses from the Principal – that is the party that purchased the bond. According to CA Civil Code 8424
- An owner of real property or an owner of any interest in real property subject to a recorded claim of lien, or a direct contractor or subcontractor affected by the claim of lien, that disputes the correctness or validity of the claim may obtain release of the real property from the claim of lien by recording a lien release bond. The principal on the bond may be the owner of the property, the direct contractor, or the subcontractor.
- The bond shall be conditioned on payment of any judgment and costs the claimant recovers on the lien. The bond shall be in an amount equal to 125 percent of the amount of the claim of lien or 125 percent of the amount allocated in the claim of lien to the real property to be released. The bond shall be executed by an admitted surety insurer.
How Much Does a Mechanic’s Lien Release Bond Cost?
Collateral is a requirement in most instances The cost of the bond will depend on the type of collateral given. With cash or an Irrevocable Letter of Credit (ILOC) given as collateral, the premium is usually 1% of the bond amount. With publicly traded securities or real property, the premium is usually 3-4% of the bond amount.
How to Obtain a Release of Mechanic’s Lien Bond?
To obtain a release of mechanic’s lien bond, submit an application to the Surety company of your choice. The Surety company will need the following documents to process your application:
- Court bond application
- Lien form or any other document that contains details related to the lien
- Business financial statements
- Personal financial statements
Once the Surety receives your application, they evaluate your financial health and determine if collateral is required or not.
H.M. Vreeland is one of the oldest, most trusted Surety bond companies in California. Our Surety bond specialists have decades of experience helping businesses and individuals choose and obtain the right type of Surety bond for their needs. To request a quote, call our office at (415) 566-3401.