Mechanic’s Lien Release Bond: Frequently Asked Questions

A lien is a mechanism used by contractors and suppliers to force property owners, tenants, and landowners to pay the money they owe to them. It’s a form of collateral that allows the creditor to securitize their claim against a property.

A mechanic’s lien bond in California removes the lien claim from the property title record and transfers it to the bond, which guarantees that payment will be made if the claim is found to be valid by a court of law. The bond guarantees that the principal- in this case, the property owner or tenant in some cases, will compensate their contractor for the services provided by them. If the principal fails to do so, the contractor can file a claim against their bond.

What is a mechanic’s lien release bond?

If a contractor, subcontractor, or supplier doesn’t receive payment for their services or materials used to enhance, maintain, or repair a property, they have the option to Record a mechanic’s lien. A lien can cloud the title of the property, and the owner may not be able to sell or refinance it. A property owner can obtain a mechanic’s lien release bond to remove a mechanic’s lien on their property.

A mechanic’s lien release bond provides assurance that in the event of a ruling favoring the party who filed the lien, they will still receive compensation, even if the property owner defaults. The claim is transferred from the property to the bond itself.

How does a mechanic’s lien release bond work?

By recording the mechanic’s lien release bond, the principal seeks to eliminate the mechanic’s lien from the property title which will allow the property to be sold or refinanced. Upon proper legal notice of the bond’s recording to the lien claimant, the claimant has six months to commence court action against the bond principal and the Surety company. If the claimant fails to commence any court action within 6 months of the legal notice, the statute of limitations expires and the claim becomes void.

How to get a mechanic’s lien release bond?

To apply for a mechanic’s lien release bond, fill out the application form shared with you by your chosen surety bond agency. Provide all relevant details such as the property address, the amount of the lien, and share any relevant legal documents with the surety. The surety will evaluate your application, and check your credit history and financial health to determine your eligibility for the bond.

If your application is approved, you’ll need to pay the premium for the bond. Bond premium depends on different factors including the principal’s creditworthiness and the surety’s assumption of risk.

Will I be required to post collateral to obtain a mechanic’s lien release bond?

In most cases, collateral will be required, but the necessity of collateral for obtaining a mechanic’s lien release bond depends on various factors including the bond amount, the financial position of the applicant, and the specific conditions set by the surety. Bond premiums can vary depending on the type of collateral posted.

H.M. Vreeland is a trusted surety bond company catering to individuals and businesses in California. Regardless of the type of surety bond you need, we have got you covered. For Surety bond assistance, call 415-566-3401.