As a result of not getting paid for improvements to real property, you filed a mechanics lien. Rather than pay the lien, the owner of the property or general contractor posted a bond to discharge the lien. What does a mechanics lien bond mean and what do you need to do to get paid?
Article 2, section 37 of the NY lien law allows a party to post a bond before or after an improvement to real property has been made. The bond executed by a surety or fidelity for an amount to satisfy the potential judgment must be approved by the court. Only then will the bond “substitute” for the lien and the lien will be discharged.
Relief Against a Mechanics Lien Bond
As with an action to foreclose on a mechanics lien, the creditor (lienor) must prove that they are entitled to get paid. More specifically, the creditor will bring legal action against the surety company rather than against the property.
The creditor will need to lay out their case carefully and in detail in the summons and complaint to illustrate that the goods were supplied and/or the service was requested and performed in accordance with the owner or agent’s request.
Say you supplied and installed drywall at the general contractor’s request and are owed $100,000. You filed a lien and the agent or owner bonded the lien. Ready to proceed against the surety here’s what you need to do.
The litigation could include the owner of the property but it’s not always required. If going against the bond only, the creditor will only need to name the surety. But, if you, as the creditor, are looking for other relief as part of the same lawsuit, you would need to include other parties.
If going against the bond, you would only need to name the surety as a defendant in the action. You would then need to go through the history of the claim, providing a description of the project including the location, who engaged you to do the work or provide the supplies, what you were engaged to do, and how and when you performed.
Following that, you would move on to describe your billing activities. When the bills were sent to the party that engaged them on behalf of the owner of the real property, and when an account stated was sent and retained by the owner’s agent.
The next section of the complaint would describe the mechanics lien including when the lien was served and filed, the timeliness of the lien, the property liened, and the timely filing of extensions, if any.
Next would be a reference to the bond: when it was posted, any reference numbers, etc.
The relief that the creditor looks for is the foreclosure of the bond, not of the lien. As the bond has taken the place of the lien.
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