You've filed your lien, what to look for next... Part 2

SEPtember 15, 2017

Another option available to the general contractor or property owner once a claim of lien has been filed is to “bond off the lien” by posting a lien release bond. Posting a lien release bond has the effect of releasing the claim of lien from the property and substituting the lien release bond in place of the lien.

As the lien filer this may be very good news for you because it means that if you prevail on your lien perfection lawsuit (now lawsuit to recover on the lien release bond) you will be paid by the bonding company which put up the lien release bond.

While the lien release bond releases the claim of lien from the property, the time period for bringing the lawsuit on the bond is the same as the time period for filing suit to perfect the lien; 365 days. The lien release bond may contain language regarding the statute of limitations, or the period in which the lien filer must institute an action to recover on the bond. Since the claim is now on the bond, the language of the bond, being a contract, will control the time of filing if such language is included in the bond. The bond may also contain specific information regarding how service of the bond action is to be made on the bonding company.

Because the lien has been released from the property, certain notice rules pertaining to lien perfection actions no longer apply. For example, the notice of commencement of lien action, which must be served on the property owner in a lien action, is no longer required because there is no longer a lien pending on the property. Performing a lien search on the property being improved will reflect the existence of a lien release bond if one has been filed. As with the lien perfection action, the initial lawsuit is against the contractor. However, instead of a lien foreclosure action against the property owner, the foreclosure action becomes a lawsuit against the bonding company.