Construction Law

What Is “Bonding Off” a Mechanics Lien?

When an owner refuses to pay you for the work you’ve contributed to a project, it can create a sensitive situation for all parties involved. First and foremost, you don’t want to be denied payment when you’ve invested time and resources into a project. Second, you’re responsible for making sure your subcontractors get paid, so you can continue utilizing their services and reinforce your professional relationship. Third, you don’t want to cut ties with an owner, especially one that has supported you on past projects.

Unfortunately, when you’re forced to exercise your right to file a mechanics lien against an owner, it can feel like the relationship you’ve spent time cultivating is unsalvageable. The good news is that this doesn’t have to necessarily be the case. In this short article, a Miami contractor attorney from Cotney Construction Law will discuss the process of “bonding off” a mechanics lien to reach a favorable outcome for all parties involved in a project. This is by no means a perfect solution to combat nonpayment, but it is a viable option that our Miami contractor attorneys can help you explore if you so choose.

How Exactly Does “Bonding Off” Work?

While most contractors understand the purpose of a mechanics lien, the concept of bonding off a mechanics lien is less familiar. Put simply, bonding off a mechanics lien occurs when a surety bond is substituted for the property the mechanics lien is filed against. As a result, the mechanics lien would become a mechanics lien bond as the claimant facilitates a payment bond against the surety bond.

When Does the Process of “Bonding Off” Begin?

Once the claimant has filed a mechanics lien against the property, either the contractor or the owner can reach out to a surety bond company to procure a surety bond equal to the value of the mechanics lien. The bond is then substituted in place of the property to become the subject of the claim. Rather than waiting for the sale or foreclosure of the property, the proceeds from the claim will be sourced from the surety bond.

Weighing the Benefits

Depending on the circumstances of your situation, bonding off a mechanics lien could benefit you, subcontractors, and even the owner. When a mechanics lien is bonded off, the payment bond will be available to help reimburse you for nonpayment as intended by the original claim. In many cases, this can help reduce the amount of time it takes to enforce the claim since the bond claim process is often faster and simpler than the mechanics lien process. Additionally, it could prevent your project from skidding to a stop since the owner’s title won’t be burdened by a pending mechanics lien claim. Keep in mind that this isn’t always the case, so consulting a Miami contractor attorney can help you determine the best course of action for your particular situation.

If you would like to speak with one of our Miami contractor attorneys, please contact us today.

 

Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.