Release of Lien Bond Guide

A lien is a financial security providing the legal right to claim collateral property of a debtor to satisfy a debt. 

In all states except New Hampshire and Vermont, subcontractors and suppliers on construction projects can file a mechanic’s lien against a property if they are not properly compensated for their work on it. 

What Is a Release of Lien Bond? 

A release of lien bond is a type of court surety bond to ensure payment for products and services in construction projects. These bonds are also known as:

• Mechanic’s lien bonds 
• Lien discharge bonds

Mechanic’s lien bonds allow contractors and property owners to remove property liens by transferring that financial liability to a surety bond. This streamlines the legal claims process and protects subcontractors from financial loss. 

How Does a Release of Lien Bond Work? 

A release of lien bond is a three-party contract between a:

• Principal: Party purchasing the surety bond — the property owner wanting to release their lien  
• Surety: Company issuing the surety bond and backing the principal’s obligation
• Obligee: Party requiring a surety bond from the principal — the lien holder

The subcontractor (obligee) needs assurance that they can still receive compensation for claims after releasing their lien. With a bond in place, the surety will pay out claims on the bond even if the contractor is insolvent. 

Who Needs a Release of Lien Bond? 

Bonding around a lien, or bonding over a lien, is a tactic to replace a property lien with collateral in the form of a surety bond or cash bond. Contractors and property owners may need a release of lien bond to meet the following needs: 

• Fulfill court orders
• Remove a property lien
• Prove trustworthiness as a project owner 

How Much Do Bonds for Release of Lien Cost?

A mechanic’s lien bond is usually 1–3x the lien amount. Release of lien bond premiums are calculated as a small percentage of the total bond amount, typically 1–2%. Apply today for an exact quote. 

These high-risk bonds require a collateral match along with the premium to guarantee the ability to recover costs of any claims. Acceptable forms of collateral include: 

• Cash
• Letters of credit
• Marketable securities
• Real estate

How Do I Get a Release of Lien Bond? 

Mechanic’s lien bonds act as financial guarantees which makes underwriting them a high risk for sureties. Due to this, applicants must provide strong evidence of financial capacity. 

You’ll need the following information to apply for your bond: 

• Copy of recorded mechanic’s lien
• Completed Release of Lien application
• Personal and/or business financial statement 
• Credit score
• Collateral security 
• Signed indemnity agreement

Start the process by submitting on online request form now. Our friendly surety experts will help guide you through the rest of the process.

Can I Get a Release of Lien Bond With Bad Credit? 

Due to their risky nature, it’s difficult to get a release of lien bond with poor credit. However, SuretyBonds.com offers a Bad Credit Bonding Program and may be able to help if you provide strong financial documentation. 

Get Expert Support 

Our friendly surety experts are available Mon–Fri to help you at every step of your release of lien bonding process! With over 14,000 5-star reviews, SuretyBonds.com offers the fastest and easiest bonding process in the industry.