What is a Lien Transfer Bond?

A Lien Transfer Bond discharges a lien from the property and replaces it with a bond to guarantee satisfaction if the court upholds the lien’s merit. When a construction lien is recorded, the lien can be transferred to a lien transfer bond (thereby removing the encumbrance or cloud on the property caused by the lien). The procedure to transfer a lien to a lien transfer bond is statutory in nature.

A lien does not necessarily have to be transferred to a bond immediately after the lien is recorded. Rather, an owner (or other person with interest in the property) can transfer the lien to a bond after the entity or person that recorded the lien (referred to as the “lienor”) files a lien foreclosure lawsuit. In this circumstance, it is important for the lienor to know that they must amend their lien foreclosure action to assert a claim against the lien transfer bond; otherwise, the lienor will essentially lose its lien rights. The lienor will not be able to foreclose the lien as to the property (because it was transferred to a bond) and the lienor will not be able to pursue its claim against the lien transfer bond.

Bond Premiums and Bond Amounts:

Defendant bonds, which this is, typically require full collateral in the amount of the bond (which will exceed the amount of the lien). The bond amount is set by state statute.

The Florida Statute 713.24 requires that the bond amount be for the amount of the lien, plus interest at the legal rate for three years, plus attorney’s fees in the amount of 25% of the lien amount or $1,000 (the greater of).

When is a Lien Transfer Bond used most often?

A Lien Transfer Bond can apply to many types of property including a Mechanics Lien on real property, automobiles or admiralty. The defendant’s bond amount varies by state but usually includes a provision for interest and court costs.

contractor cutting metal with saw

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