Under California Civil Code, contractors and design professionals have a right to file a lien against real property once work has begun on the project. There are notification requirements contemplated under the Code, so a property owner will likely receive a notice of lien very quickly. Liens can complicate, delay and perhaps terminate an owner's effort to sell or refinance his or her property however the statute also provides a mechanism for immediate relief. A California Mechanic's Lien Release Bond will clear the lien (bond off the lien) from the deed!
A lien release bond must be issued by a surety company with a certificate of authority in California and must be written in a penal sum equal to one and one quarter times (125%) the amount of the claim. The surety bond obligation guarantees the payment of the sum that the lien claimant may recover on an action plus costs if the lien holder prevails. Upon filing of the mechanic's lien release bond, the property referenced in the body of the lien bond is released from the lien and effectively stays any foreclosure proceedings initiated to enforce the lien. The lien release bond is "alternate security" for the lien liability.
The Code allows the property owner, the contractor or design professional holding the lien or any party with an interest in the property, such as a mortgage bank or creditor that relies on the property as collateral to secure its extension of credit. The California Mechanic's Lien release bond may be filed at any time after the lien has been recorded but must occur before a final judgment of foreclosure. The surety bond principal must also notice the lienholder of the filing of the lien release bond. Any civil action initiated to collect on the lien must be amended to a suit against the bond rather than the property.
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