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These surety bonds are general for all states.
Learn more about mechanics lien bonds, and apply today. Absolute Surety offers surety bonds nationwide through a convenient online application system.
Despite the name, mechanics liens have nothing to do with the automotive industry and everything to do with construction. A general contractor can place a mechanics lien on the property of a project owner when there is a dispute over money owed for services or materials provided by the contractor. The lien allows the contractor to legally foreclose on the property in order to secure payment of the disputed sum.
A mechanics lien bond, more appropriately called a “release of lien security bond,” is a type of court bond required in cases where a debt is in dispute or the ownership of property is at stake. The bond provides a way for the project owner to regain the legal right to sell the property. It releases the mechanics lien while guaranteeing that the contractor who filed the lien will be paid the amount owed by the project owner, plus interest, in the event that the contractor wins the court case.
Project owners who have had a mechanics lien placed on their property as the result of a legal dispute with a contractor over nonpayment for services or supplies may be required to purchase a mechanics lien bond prior to resolution of the dispute.
In issuing a mechanics lien bond, the surety company guarantees that the disputed amount will be paid if the court rules against the project owner contesting the lien. The contractor, after winning in court, will file a claim against the bond, and the surety company will pay it as guaranteed. However, the principal is then responsible for reimbursing the surety company. The collateral requirement helps ensure that the surety company is repaid for the amount paid out to the claimant.
The required bond amount is set by the court adjudicating the claim against the project owner (the bond principal). The premium for these types of bonds is typically 2% to 5% of the bond amount, and collateral is usually required. The surety company will establish the premium rate based on the principal’s credit score and financial situation and the details of the dispute.
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