Mechanic’s liens are issues in favor of builders, contractors, subcontractors, or supplies who have furnished labor or materials for construction or improvement of a property.
If builders, contractors, and suppliers have not been paid, they can file a mechanic’s liens on the property as a method to ensure they get paid for their services and materials.
A mechanic's lien attaches to the land and building. When a mechanic's lien is issued, the property owner cannot do anything with the property.
What is a Discharge of Mechanic's Lien Bond?
A Discharge of Mechanic’s Lien Bond is a type of surety bond that validates non-payment for work, labor, and supplies involved with a piece of property.
If a subcontractor has put a mechanic’s lien on your property, you can get a Discharge of Mechanic’s Lien Bond to remove the lien from your property.
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How Does a Discharge of Mechanic's Lien Bond Work?
A Discharge of Mechanic’s Lien Bond allows property owners to do with their property as they wish, as if the lien were not present. This includes selling the property, getting further remodeling done, etc.
In a way, a Discharge of Mechanic's Lien Bond works as an extension of credit. The bond guarantees that the property shall pay the contractor all amounts owed upon final determination by the court.
The word discharge can cause some confusion. A Discharge of Mechanic’s Lien Bond does not extinguish the mechanic’s lien entirely. It discharges the lien from the property and attaches it to the bond.
What Happens After I Get My Bond?
Once you file a Discharge of Mechanic’s Lien Bond, the lien is attached to the bond. When this happens, the lien will have to be discharged from the bond before it goes away entirely.
To discharge the lien from the bond, you have a few options.
One option is to wait it out. The lien will expire from the bond in the same manner as it would if it were on the property.
Generally, liens expire one year from filing. If this happens, the surety bond company who issued your bond will return the collateral to you that was required to issue your bond, if collateral was required.
Before a mechanic’s lien expires, though, two things can happen.
- Either the lienor (the person who originally put the lien on the property) can foreclose upon it or
- You can attempt to have the lien canceled by proving the required payment is not owed.
With either of these options, you risk a lot. Small errors can cost you everything, which is why Discharge of Mechanic’s Lien Bonds are extremely risky to issue.
How Much Does a Discharge of Mechanic's Lien Bond Cost?
A Discharge of Mechanic’s Lien Bond amount will always be at least 110% of the lien face value.
The cost of the bond (called the bond premium) will a percentage of the total bond amount.
Full collateral is often required for this bond.
Some carriers will write this bond without full collateral.
How to get a Discharge of Mechanic's Lien Bond
The best way to get a Discharge of Mechanic’s Lien Bond is to contact a surety bond company who can issue you the bond.
Not all surety bond companies will issue these bonds, though. They are risky and often require full collateral.
If you choose Surety Solutions for your Discharge of Mechanic's Lien, ask us how we can get you bonded without collateral.