Lien Bond
A Lien Bond is a court-approved surety bond for a defendant wishing to discharge a lien against property. States have variable names for the Lien Bond (Mechanic’s Lien Bond, Transfer of Lien Bond, Release of Lien Bond, Discharge of Lien Bond) but all serve the same purpose: to hold the defendant liable for payment if the court deems the lien valid.
Jet Insurance Company, as a direct surety provider domiciled in North Carolina, issues the guarantee on your behalf to the court. These bonds are applicable across multiple industries including, but not limited to, automotive and construction.
What Is the Bond Limit and Cost of a Lien Discharge Bond?
The bond amount is based on a calculation dependent on each state’s statutes, but always an amount sufficient to cover the cost of the property in addition to interest and court fees. For example, Florida requires the Lien Bond to be in an amount calculated by taking the property lien amount, plus three years of interest at the legal rate, plus $1,000 or 25% of the lien amount demanded (whichever is greater).
With Jet, the cost of the bond will only be a small percentage of the total bond limit, with the minimum premium being $500. Full collateral in the amount of the bond is required in the form of an irrevocable letter of credit or cashier’s check. The collateral is paid directly back to you following a court ruling in your favor or would be payable to the court for the amount of the lien, interest, or fees not already paid.
How Does Jet File the Bond?
In most states, the bond is to be filed with the circuit court in the county where the lien is. Each court has different filing procedures, but usually an original bond is needed on file with the court.
Jet will send the original bond to the appropriate court, however, the defendant can choose to file the bond themselves upon request. The application process will address where the bond should be sent. Either way, a copy of the bond will be sent to the defendant to keep for their personal records.
What Is the Purpose of a Lien Bond?
Although obtaining a Lien Bond allows the defendant to do anything they wish with the property, including damage it, the lien is not dissolved. The lien is attached to the bond to ensure responsibility for the money owed and Jet is the guarantor of this payment.
When a lien is filed, it is typically for a one-year term. The money owed by the defendant must still be paid upon the lien ending. If the money is not paid to the claimant, the bond will be used as reimbursement.
Below are examples scenarios for two different industries:
Example 1
Sandy’s car is left at the mechanic shop to get fixed and gets a ridiculously high bill. Sandy is unwilling to make payment for the overpriced repairs, so the mechanic puts a lien on the car and takes possession. Sandy takes the mechanic to court over the bill and requests a Lien Bond with the circuit court. With a Release of Lien Bond from Jet approved, Sandy takes possession of the repaired car. Sandy is then able to use the car to commute to work, run errands, etc.
Upon the court’s decision, Jet will make payment from the collateral initially collected either to the mechanic, Sandy, or a combination of both. Sandy’s life was able to keep moving while waiting for the court’s decision thanks to the surety bond guarantee from Jet allowing for the release of the car.
Example 2
A mechanics lien is filed on a residential home being built by a supplier who claims they have not been paid properly for materials provided. With the lien filed against the property the project will grind to a halt and can possibly be foreclosed on. The contractor then files a surety bond as a shield against the lien, allowing construction to continue and more time to resolve the disputed payment of materials.
With the dispute over the material payment resolved, either amicably or via court ruling, Jet will either return collateral held to the contractor, make the payment to the supplier, or a combination of both depending on the resolved terms. The supplier received a guarantee from Jet (should the suppliers claims have been valid) and the contractor was able to remove the lien from the project and continue work.
How to Apply for a Bond With Jet
The defendant must include their name, bond limit required, and address where the bond should be sent within the application. A copy of the lien will be requested as well once we receive the initial online application.
Once the bond application is complete, Jet will review it and be in contact shortly after to set up the premium payment and collateral deposit.
When Does the Bond Obligation End?
There will be a resolution to the dispute that started the initial lien. Jet, as the surety bond provider and holder of the collateral in question, will make payment as dictated by agreement from the opposing parties or court ruling. Once all parties have been made whole (and fees collected by the court if applicable) the process is completed.
Jet issues the bond in one-year terms increments which can be renewed if necessary. Typically the lien, and the bond respectively, will not take up to a year to conclude. If the bond needs to be renewed, Jet will need to gather additional premium prior to the bond’s expiration.
State-Specific Information on Lien Bonds
| State Statute | Bond Amount |
|---|---|
| Alabama | Lien amount + interest at 8% per year for 3 years + $100 for court costs |
| Arizona | 150% of lien amount |
| Florida | Lien amount + interest at legal rate for 3 years + $1,000 or 25% of Lien amount (whichever is greater) |
| Georgia | Double the lien amount |
| Indiana | 150% of lien amount or $7,500, whichever is greater |
| Louisiana | 125% of lien amount |
| Montana | 1.5 times the lien amount |
| Nebraska | 50% of contract price for contracts no larger than $1 million 40% of contract price for contracts over $1 million, but not exceeding $5 million $2.5 million for contracts greater than $5 million |
| Nevada | 1.5 times the lien amount |
| New Mexico | 125% of lien amount |
| North Carolina | 1.25 times the lien amount |
| North Dakota | Double the lien amount |
| Oklahoma | 125% of lien amount |
| Oregon | 150% of lien amount or $1,000, whichever is greater |
| Ohio | Double the lien amount |
| Texas | Double the lien amount up to $40,000, or 1.5 times the lien amount for claims over $40,000 |
| West Virginia | Lien amount |