Surety Bond Encyclopedia

Bond to Discharge Mechanic's Lien Bond - New York in All States

Brief Summary

A mechanic's lien can freeze a sale or refinance while the payment dispute drags on. This bond moves the lien off the property and onto the surety, so the closing can go forward and the dispute is settled against the bond instead of the real estate. The bond amount is set by statute at 110 percent of the lien, so the figure is known before you apply.

New York Lien Law Section 19(4) lets the owner or contractor discharge a mechanic's lien on a private improvement by filing a bond or undertaking equal to 110 percent of the lien, either before or after a foreclosure action begins. The bond is conditioned to pay any judgment rendered against the property to enforce the lien. It is filed with the clerk of the county where the notice of lien was filed and takes effect once filed and served on the lienor.

We can help with all All States bonds!

How to Apply for a Bond to Discharge Mechanic's Lien Bond:

Get a copy of the filed notice of lien showing the lien amount and the county where it was filed.
Multiply the lien amount by 1.10 to set the bond amount.
Complete the surety application and provide the financial information the underwriter requests.
Pay the premium and receive the executed bond with the surety's certified board resolution.
File the bond with the county clerk where the notice of lien was filed.
Serve a copy on the lienor or the lienor's attorney. The bond takes effect when served and filed.

Detailed Information About the All States Bond to Discharge Mechanic's Lien Bond:

The amount is 110 percent, not the lien amount

The most common mistake is ordering a bond equal to the face of the lien. Lien Law Section 19(4) requires a bond or undertaking in an amount equal to one hundred ten percent of the lien. A $50,000 lien calls for a $55,000 bond.

Who can post it and when

The owner or the contractor may execute the bond, either before or after the lienor starts an action to enforce the lien. Section 19 is titled Discharge of lien for private improvement, so this page covers liens on private projects.

What the bond promises

The bond is conditioned for the payment of any judgment which may be rendered against the property for the enforcement of the lien. The lien claim continues, but it is now pursued against the bond rather than the real estate.

Filing, service and when it takes effect

1. The bond is filed with the clerk of the county in which the notice of lien is filed. 2. A copy is served on the adverse party. 3. Under Section 19(4)(a), the undertaking is effective when so served and filed.

When a fidelity or surety company authorized in New York executes the bond and holds a certificate of qualification issued under Insurance Law Section 1111 that has not been revoked, no justification or notice of justification is needed. The company signs through officers or an attorney authorized by board resolution, and a certified copy of that resolution under seal is filed with each bond.

If no certificate of qualification is filed with the undertaking, the lienor may serve written exceptions to the sufficiency of the surety within ten days after receiving a copy. If no exception is taken within ten days, or the exceptions are set aside, the undertaking is allowed.

Personal sureties instead of a surety company

Section 19(4)(b) also allows two or more sufficient sureties who are freeholders. They must together justify in at least double the sum named in the undertaking, and the lienor gets at least five days' notice before justification. CPLR Article 25 governs undertakings except where Section 19 says otherwise.

Discharging all liens in advance

Lien Law Section 37 is a different tool. It lets an owner or contractor discharge the property from all mechanic's liens, before or after the improvement begins, with a surety company bond in an amount fixed by the court, not less than the amount then unpaid under the contract.

Eligibility and Requirements for a All States Bond to Discharge Mechanic's Lien Bond:

Bond amount equal to 110 percent of the lien under Lien Law Section 19(4).
Principal is the owner or the contractor.
Condition to pay any judgment rendered against the property to enforce the lien.
Fidelity or surety company authorized in New York, ideally holding an unrevoked certificate of qualification under Insurance Law Section 1111.
Personal sureties, if used, must be freeholders who together justify in double the bond amount.

All States Bond to Discharge Mechanic's Lien Bond FAQs:

How big does the bond have to be?

Lien Law Section 19(4) requires a bond or undertaking equal to 110 percent of the lien. Base the figure on the amount stated in the filed notice of lien.

Can I bond off the lien after the contractor has already sued?

Yes. Section 19(4) allows the bond either before or after the beginning of an action. The claim continues against the bond, which is conditioned to pay any judgment rendered against the property for enforcement of the lien.

When is the lien actually discharged?

Under Section 19(4)(a), the bond is filed with the county clerk where the notice of lien was filed and a copy is served on the adverse party. The undertaking is effective when served and filed. If no certificate of qualification is filed with it, the lienor has ten days after receiving a copy to take written exception to the surety.

Is this the same as a bond discharging all liens on a project?

No. Lien Law Section 37 covers a bond that discharges the property from every contractor, subcontractor, material man and laborer lien. The court fixes that amount, and it may not be less than the amount then unpaid under the contract.

How is the premium decided?

The surety prices the bond on the bond amount and its review of the owner or contractor asking for it, including the facts of the payment dispute. Larger liens and weaker financials mean closer underwriting.