Articles

How to “Bond Off” a Mechanic’s Lien

A mechanic’s lien can be a powerful tool in the hands of a contractor, subcontractor, or supplier that is owed money on a project.  Once recorded and perfected, a mechanic’s lien allows those that have performed work or supplied materials on a project to claim a legal right to the underlying property.  The property subject to the lien essentially serves as security for the payment of all unpaid amounts owed to the party asserting the lien. In many instances, an owner of property will often want a mechanic’s lien removed or discharged as soon as possible, without having to wait for the resolution of the payment dispute and ensuing litigation.   A mechanic’s lien can complicate the sale of the property, impair the owner’s ability to use that property as security to obtain future financing, and cause a cloud on the property’s title.

In such cases, owners can seek to “bond off” a mechanic’s lien.  In plain terms, this means an owner can seek to substitute a surety bond for the underlying property in a mechanic’s lien claim.  Basically, the surety bond replaces the property as security for the claim.

Once a certificate of lien is recorded in the appropriate registry of deeds, Maine law provides that an owner of the affected property may petition the court for a release of that mechanic’s lien in exchange for providing a surety bond sufficient to cover the value of the asserted claim.  The petition must state the name of the lienor, the court in which the action is pending (if a lawsuit has already been filed), the fact that a lien is claimed, a description of the real estate, and the owner’s interests therein.  The petition should also state the amount of the surety bond obtained as well as include a copy of the surety bond for the court’s reference.

In many instances, this process, while it requires the assistance of an attorney, is relatively straight-forward.  In fact, lienors will often consent to the substitution of a lien for a surety bond, so long as the amount of the bond is sufficient to cover the full value of the asserted claim, plus costs and interest.  This is because: (1) the lienor’s claim remains secured (now by the surety bond); and (2) such petitions are regularly granted under these circumstances without issue, even when there is no consent.

When an agreement cannot be reached prior to filing the petition, the Court will schedule a hearing to determine if there are grounds to deny the owner’s petition.  Absent any unusual issues, and assuming a sufficient surety bond has been provided, the Court will grant the petition and order the owner to file a certificate stating that the bond has been taken by the Court, along with other necessary documents, in the registry of deeds, thereby discharging the mechanic’s lien on the property.

Discharging a mechanic’s lien does not resolve the payment dispute, of course, but this process can be invaluable for owners that need to clear title on their property quickly during the pendency of such a dispute.

Perkins Thompson regularly helps owners, contractors, subcontractors and material suppliers with mechanic’s lien issues. If you would like to speak with the firm about a mechanic’s lien issue, you can send an e-mail to Joe Talbot or call him directly at 207-774-2635.