Mechanic’s liens, despite their name, are not typically used by mechanics. Instead, they are used primarily by builders, contractors, subcontractors and suppliers. Builders, contractors, and suppliers can use mechanic’s liens as a method to ensure they get paid for their services and materials.
What is a Discharge of Mechanic's Lien Bond?
What is a Discharge of Mechanic’s Lien Bond? It 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 what they would if a lien was not present: sell the property, get further remodeling done, etc. In a way, it works as an extension of credit. The bond proves that the property owner has sufficient funds to pay the people involved.
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 you used to get your bond.
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 and expensive to issue.
How Much Does a Discharge of Mechanic's Lien Bond Cost?
The cost of a Discharge of Mechanic’s Lien Bond will always be at least 110% of the lien face value. Where the cost will vary is in the premium that the surety bond company charges you for the bond.
The premium is based upon the total amount of the lien. So, in short, the cost of a Discharge of Mechanic’s Lien Bond will be at least 110% of the lien face value plus the bond premium.
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 require full collateral. If the surety bond company can issue you a bond, you will need to fill out a bond application and apply for your bond.