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Release of Mechanic's Lien Surety Bond

When a property owner fails to compensate a contractor or materials supplier for services rendered, the aggrieved party may file what's known as a mechanic's lien against the property itself. Liens make it very difficult to sell or finance the property, yet property owners may have a justifiable reason for withholding payment. In that instance, they can fight to remove the lien from the property title, but first they must obtain a specific kind of court bond.

What is a Release of Mechanic's Lien Surety Bond

A judge may grant a property owner a release of mechanics' lien, which removes the lien designation from the property title. However, the property owner will need to secure a bond first. If a judge later rules the lien was valid - that the property owner did in fact owe money to the contract/supplier - the lienholder may file a claim against the bond for financial compensation equal to what they were initially owed plus, potentially, court costs and attorney's fees. Courts require bonds so that property owners cannot avoid their financial obligations to lienholders even if they can remove the lien from the title.

How does a Release of Mechanic's Lien Bond work?

A release from a mechanic's lien doesn't terminate a lien, it simply transfers it from a property to a bond. If a judge later rules in favor of the lienholder and the property owner refuses to settle, the lienholder may file a claim on the bond. Once an investigation proves the claim valid, the surety company that backs the bond guarantees payment up to the bond amount even if the principal refuses to pay. If the bond company does settle the debt, however, the property owner who owns the bond must pay the surety back.

Who should get a Release of Mechanic's Lien Surety Bond?

Since selling or financing a property becomes significantly easier without a mechanic's lien on the title, anyone in this situation should consider getting a bond if the court allows them to.

Who are the parties involved in a Release of Mechanic's Lien Bond?

All surety bonds, including court bonds like this one, involve three parties:

  • Principal - The property owner trying to get the mechanic's lien removed. As the bonded party, the principal must settle valid claims filed against the bond, although it is best to handle the situation in a manner that does not result in bond claims.
  • Obligee - The lienholder and bond beneficiary. The obligee may only file a claim against the bond if the principal refuses to pay the court judgement.
  • Surety - The company that issues bonds and investigates claims. The surety guarantees payment for valid claims, but it acts like a line of credit that the principal must pay back with interest and fees added.

How much does a Release of Mechanic's Lien Bond cost?

The judge granting the release of mechanic's lien will also mandate the amount of the bond required. Premiums for that bond are a small percentage of the total. How much a principal pays to obtain a bond depends on his or her credit score, financial history, and the details of the case. Bond applicants with a low credit score or a bankruptcy on their record will pay slightly more, but bad credit won't disqualify them from securing a bond in a timely manner when they work with Viking Bond Service.

How are claims handled for Release of Mechanic's Liens Surety Bond?

The process starts with an investigation by the surety into the validity of the claim. If the principal cannot settle the claim on their own for any reason, the surety will make payment to the obligee. It's now the principal's obligation to pay back the surety whatever amount was paid settling the claim, along with interest and fees as necessary.

How to apply for a Release of Mechanic's Liens Bond?

After finding a quality surety brokerage to work with, you will submit a bond application with information about your credit, finances, and background. Underwriters at the brokerage also need a copy of the court order detailing the bond requirements, and possibly other information/documentation as required.

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Viking Bond Service goes above and beyond to ensure we meet all your bonding needs. Get information from one of our bond experts by filling out the contact form on this page, or speak to one directly at 888-278-7389. You can also start the bond process at any time by completing our online application.

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