A Transfer of Lien bond, also known as a lien discharge bond or release of lien bond, is a type of surety bond used to “bond off” a mechanic’s lien that has been placed on a property.

How it Works

When a contractor, subcontractor, or supplier is not paid for the work or materials they’ve provided on a project, they can file a mechanic’s lien on the property. This lien acts as a legal claim against the property, preventing the owner from selling or refinancing it until the debt is paid.

A mechanic’s lien bond is a financial tool that a property owner can use to remove the lien from their property while the dispute is being resolved. The property owner purchases the bond, and the bond’s value is typically 1.5 times the value of the original lien.

By issuing the bond, the surety company essentially takes on the financial risk of the lien. The property is released from the lien, and the legal claim is transferred to the bond. This allows the property owner to proceed with selling, refinancing, or otherwise using their property, while the contractor’s claim is still being addressed in court or through other dispute resolution methods.

If the court rules in favor of the claimant (the contractor who filed the lien), the surety company will pay the amount of the lien up to the bond’s value. The property owner is then legally obligated to reimburse the surety for the full amount paid out.