Surety Bond Professionals is a family-owned and operated bonding agency with over 30 years of experience. With access to a broad range of surety markets, our expert agents are ready to assist with all your California mechanic’s lien release bond needs.
What Are They?
A mechanic’s lien is a way for a subcontractor or supplier to establish a legal claim on a property for which they provided labor or materials, but the general contractor or property owner has not paid for. It takes some time to work through the prescribed sequence of events that must occur to establish and enforce a mechanic’s lien. But the upshot could be foreclosure if the lien is not removed by paying the underlying debt.
Under California law, the property owner is responsible for any labor or supply costs that the general contractor doesn’t pay. Even if it was the general contractor that failed to pay the subcontractors hired for the project or the suppliers that provided materials, it’s the owner whose property is at risk if the mechanic’s lien process concludes in foreclosure.
Property owners can eliminate a lien through a process called “bonding off.” This involves purchasing a California Mechanic’s Lien Release surety bond for 125% of the amount of the mechanic’s lien. The bond will substitute for the real property to guarantee repayment of the debt, and the lien will be released.
Who Needs Them?
If you’re a California property owner, you may want to protect yourself against the possibility of foreclosure action due to a mechanic’s lien by purchasing a mechanic’s lien release bond. You can do this between the time a mechanic’s lien on your property has been recorded but before a final foreclosure judgment.
Speak with a Surety Bond Professionals agent today to discuss your bonding needs.
How Do They Work?
Bonding off a lien does not eliminate the underlying debt. The bond is the property owner’s guarantee that legitimate claims will be paid, just not out of the proceeds from a foreclosure sale.
What actually happens is that in selling a California mechanic’s lien release bond, the surety bond company (surety) establishes a credit line for the property owner in the required bond amount. That credit line will serve as the source of funds for paying claims.
If the surety is unable to negotiate a better settlement, they will go ahead and pay a valid claim on behalf of the bonded property owner. The terms of every surety bond contract legally obligate the bonded individual, not the surety, to pay claims, so the property owner must reimburse the surety in full.
What Do They Cost?
The premium for a California mechanic’s lien release bond is a small percentage of the required bond amount. The surety bond agency determines what that percentage—the premium rate—will be for a given property owner.
A release of lien bond may be required to be fully collateralized by the surety. For principals with very strong financials, these bonds can sometimes be done on an uncollateralized basis. But this is very much on a case-by-case basis.
Because the biggest risk to the surety is that the property owner won’t reimburse the agency for claims already paid out, the primary factors influencing the premium rate is the owner’s creditworthiness and financial strength. Fully collateralized bonds will come with a lesser premium rate, while uncollateralized bonds could come along with a premium rate of 2-3%.
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Our surety bond professionals will get you the California mechanic’s lien release bond you need at a competitive rate.