Mechanics liens are construction’s most powerful tool for securing payment. That’s because a filed lien clouds the property owner’s title to the land, and can eventually result in the foreclosure of that property if the dispute is not resolved. In many states, there’s a process that will remove a lien from the property title while also not stepping on the toes of a lien claimant.
That process is called bonding off a lien. When a lien is bonded off, the lien claimant still has the ability to recover from the bond, but the property is no longer burdened by the lien.
But claimant’s should know: There are extra considerations and requirements when a lien is bonded off! Read on for a discussion of how this process works in the state of Florida.
Bonding Off Florida Liens
Under Florida lien law, “any person having an interest in the property upon which a lien has been recorded or a lien foreclosure lawsuit has been filed, may transfer a lien off the property to a cash deposit or surety bond.” Decoded: this simply means owners, lenders, and contractors may bond off Florida liens. The goal of this provision is to ensure payment on construction projects and protect owners from overpaying (or paying twice) any project participant.
This can be achieved by depositing money with the clerk’s office or filing a surety bond with the clerk’s office. Needless to say, it’s more common for a bond to be filed. A lien isn’t bonded off in secret, though. Once the lien is transferred to a bond, the clerk must record a certificate as evidence of the transfer then mail a copy to the lien claimant. Consider this notice a call to action! You still can get paid, but need to take a few extra steps to secure your rights. Unfortunately, when a lien is bonded off, this will include a lawsuit.
What to Do If Your Florida Lien Is Bonded Off
Once a lien is “bonded off”, the clock starts ticking for the claimant. The claimant has one year to file suit against the bond that replaces the lien. If you miss this deadline, you essentially forfeit your rights. That means you will not be able to foreclose on the lien claim, and you won’t be able to pursue the claim against the bond, either.
Keep in mind, even if you have initiated a lien enforcement lawsuit, the lien may be bonded off! A claimant may have to either amend their lien enforcement action or file a new suit against the bond.
Claimants must keep a close eye on the proceedings because the one-year timeframe begins the moment the lien is transferred to a bond.
Ultimately, a one year period seems reasonable. After all, it’s the same time period to enforce a filed lien! But this foreclosure period can be reduced to as little as 60 (in the event of a Notice of Contest to Lien), or even 20 days (for a Rule to Show Cause filing). We’ll discuss both below.
Notice of Contest of Lien (common)
At any point during the lifespan of your lien, an owner may elect to shorten the time period by filing a Notice of Contest of Lien. Essentially, this is the owner challenging your lien and requiring the claimant to prove the validity of their claim. When a Notice of Contest of Lien is filed, the foreclosure period on the lien is automatically reduced to 60 days.
Now, you might be thinking: What’s this got to do with bonding off liens? Well, when a lien is bonded off and a Notice of Contest of Lien is also filed – a claimant will have to act fast! When both documents are filed, not only will a lien claimant need to take steps to make their claim against the bond – but they’ll only have 60 days to do it!
Rule to Show Cause (less common)
Although less prevalent, this is another issue that can quickly and severely destroy your lien claim is a Rule to Show Cause filing. An owner may file this complaint in court demanding that the claimant show why their lien should not be vacated and canceled. When filed, the clerk will issue a summons to the claimant. Then, that claimant will be obligated to show cause within 20 days. If the claimant misses this deadline, the court will order for the immediate cancellation of the lien. Of course, this Rule to Show Cause may also be filed in conjunction with a bonded off lien. If that happens, a claimant will really have to snap into action.
When you find that your lien has been bonded off, don’t panic. The payment claim is still alive, and you can still recover what you’re owed. However, it’s vital that you remember recourse is now against the bond, not the property. It’s even more important to understand your deadlines and how they might be affected. Just be sure that you file a claim against the bond itself and keep track of your deadlines!