Lien Release Bonds: Bonding Off a Mechanics Lien

A mechanic’s lien is a legal claim made against a property by a contractor or subcontractor who wasn’t paid for the work they performed on it. Unpaid suppliers can make a mechanic’s lien as well. In many cases, homeowners or contractors purchase a lien release bond to release the lien on the property.

Bonding Off a Mechanics Lien

In California, when a homeowner or contractor buys a mechanics lien release bond, the claim attaches to it and the property owner could sell or refinance the property. A lien release bond does not absolve the debt. The process of purchasing a lien release bond from a surety bond company is known as bonding off a mechanics lien.

Once a claimant files a mechanics lien, the property owner or contractor can contact a surety bond company to buy a mechanics lien. After the lien is bonded off, the property cannot be sold or foreclosed to recover the claim amount.

Advantages and Disadvantages of Bonding Off a Mechanics Lien

There are several benefits as well as some disadvantages of bonding off a mechanics lien for all the parties involved in the construction project.

Benefits for Claimants

Bonding off a mechanics lien saves the claimants the hassle of navigating the complex and time-consuming lien foreclosure process. When a lien is bonded off, the surety company steps in to pay the claim, eliminating the need for a lengthy enforcement action.

Advantages for Property Owners and General Contractors

When a mechanics lien is bonded off, the property owner heaves a sigh of relief and can rest assured that the claim will not be made on their property.

A mechanics lien can put the project on hold and put it at risk for foreclosure, frustrating the contractor who may have invested a substantial amount of time and money by the time the claim is made. After a mechanics lien is bonded off, the contractor working on the project has peace of mind knowing the claim won’t disrupt work.

Cons for Claimants

In some cases, bonding off a mechanics lien can do more harm than good. After a mechanics lien is bonded off, the Principal will have to make the effort to familiarize themselves with the next steps they need to take.

Disadvantages for the Buyer

Bonding off a mechanics lien can be a difficult, time-consuming and expensive process. The GC or property owner may have to give collateral of 1.25 times the claim amount for the lien release bond.

In addition, a lien release bond provides temporary relief from the mechanics lien. During this period, the claimant and the bond owner can try to resolve the dispute amicably.

H.M. Vreeland is a renowned surety bond company in California. We help businesses make informed decisions when selecting a surety bond. To talk to one of our pros, call (415) 566-3401.