Your Mechanic Lien Was Bonded…Now What?
On October 14, 2010
By Scott Wolfe Jr
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After you file a mechanic lien, a number of things may happen. The lien may be paid off (and then canceled), or you may be required to file a lawsuit to foreclose on the mechanics lien (Read our previous blog post: What Happens After You File A Mechanics Lien?)
Something else may happen after a lien is filed – it could be bonded.
A lot of property owners and prime contractors will bond off a construction lien as an intimidation factor. As the claimant files the lien to make a statement that the debt isn’t going away, so too does the liened party file a bond to take the wind from the claimant’s sails.
But, what is the exact effect of the lien bond? Does it destroy the claimant’s claim, or render the mechanic lien worthless?
The answer: absolutely not.
This point was recently discussed by Vincent Pallaci on his New York Mechanics Lien blog, explaining as follows:
The bond does not discharge the mechanic’s lien in the sense of extinguishing it, it discharges the lien in the sense of removing it from the property. But the lien remains live an well. The mechanic’s lien, having been removed from the property, is now attached to the discharge bond.
To explain this in a different way, after your lien is bonded, you can no longer foreclose on the property. However, the property has been replaced by the surety’s bond. So, you are allowed to enforce your lien against that bond, and the surety’s funds. You still have guaranteed money there – and in fact, the surety’s money may be better security than the equity in the property itself.
The lien is still there, and even if it’s bonded, it’s still important. Without filing the lien, you’ll never get it bonded…which means, you’ll never have the surety’s funds available to enforce your claim.
Related posts:
- If A Construction Lien is Bonded…Does that Circumvent Payment to an Claimant?
- Set Your Mechanic Lien Amount With Care: The Perils of Small Mistakes and Exaggeration
About the Author: Scott Wolfe Jr
Scott is the founder of Zlien, a nationwide mechanics lien and preliminary notice filing service. Zlien publishes the Construction Lien Blog, and has done so since 2007. Scott has been a leading contributor and author on the blog since it's initial publication. Scott is also the founder of Wolfe Law Group, a construction law firm that practices along the West Coast and in Louisiana. He lives in New Orleans, LA, where he was born and raised.
[...] Your Mechanic Lien Was Bonded…Now What? (zlien.com/blog) [...]
Lienors should not overlook that if the surety becomes insolvent, they can move to have the surety “re-justify.” If the surety does not show that it is in funds and the owner and GC do not supply fresh security, the lien can be reinstated.
Thank you for the comment.
[...] The only remedy for the property owner or prime contractor to fix a mechanics lien problem is to pay the lien claim or file an action challenging the lien (they can also bond it, but this is not really hurtful to the claimant as we explain here). [...]