Mechanics liens are powerful for a number of reasons, but they all tie back to one thing: a lien attaches to the underlying project property and puts the property title in danger. In many states, an interested party (like an owner or a GC) can bond off a filed lien, which releases it from the property title. But, what happens if a Massachusetts mechanics lien is bonded off? How does a claimant pursue payment?
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Bonded off liens, generally
Massachusetts is one of many states that allows for a mechanics lien to be “bonded off”. Essentially, a lien being “bonded off” means that a surety bond has been secured and recorded in order to take the place of the project property. So, instead of the claim being tied to land where work was performed, the claim is now tied to the surety bond.
In every state where this is allowed, the claim for payment, itself, is not extinguished. Rather, the recovery on that claim changes a bit. Generally, there will be some additional requirements or considerations that come into play when a lien is bonded off, and Massachusetts is no exception.
More information for bonded off liens:
- Primer on Mechanics Lien Bonds and Bonding a Mechanics Lien
- Bonding Off Liens: Claimants May Face Extra Requirements
What happens when a Massachusetts mechanics lien gets bonded off?
When a Massachusetts mechanics lien is bonded off, the original lien filing is dissolved. It isn’t really “transferred” to the bond (like in some other states). The ability to recover payment from the bond still exists, but that’s more or less treated like a completely separate recovery method. As a result, some of the rules that apply when enforcing a mechanics lien claim won’t apply to a claim against the surety bond provided to release the lien.
Before filing suit, try talking it out
When a payment dispute results in a lien filing, chances are tempers are high and that no one wants to talk through the issue at hand. But some contractors and owners might surprise you. It’s a common knee-jerk reaction to challenge a filed lien claim, and owners and contractors regularly wield their ability to bond off a lien as some sort of weapon. However, bonded off liens can actually be a positive for some claimants. Plus, chances are that nobody wants to get lawyers and courts involved any more than they have to be.
When a lien has been filed and bonded off, trying to talk it out might be pointless – but it’s probably worth a shot. Owners and contractors should understand that the fastest and cheapest way to resolve the dispute will almost certainly be to reach some mutual understanding and to pay what’s owed. Plus, if talking it out doesn’t work, a claimant can always move on to other options.
A threat to file suit might speed things along
When a mechanics lien has been filed, a threat to enforce the filed lien claim is often a helpful step in the recovery process. By sending a document like a Notice of Intent to Foreclose, a lien claimant can show the property owner that they’re serious about recovery and that they’re willing to do what it takes to get paid. The same is true when a lien is bonded off.
When a lien is bonded off, as we’ll discuss below, the claim is still enforced in a manner that’s similar to enforcing a mechanics lien. So, making a threat (to whoever posted the bond – often, the owner or the general contractor) to bring a suit against the surety bond could result in payment. Again – nobody likes dealing with a mechanics lien, but everyone really hates being caught up in a lawsuit. So, providing one more chance to make payment before proceeding with a suit could be beneficial.
Filing suit against the bond
Threats to take action may work, but when a lien is filed, the next official action is typically to file a suit to enforce the lien against the project property. In Massachusetts, lien claimants have an additional requirement after they file an enforcement suit, though. Once the suit is filed, Massachusetts claimants must also record a copy of that proceeding with the registry of deeds under § 5 of the state’s mechanics lien statute.
Enforcing the claim is a bit different than a lien
When a mechanics lien has been bonded off, the enforcement suit is brought pretty much in the same way. The main difference is that suit must be brought against the surety bond that discharged the filed lien, rather than the property itself.
There is one aspect that changes pretty substantially, though.
When a Massachusetts lien is filed then later enforced, the lien claimant will have to file a copy of their complaint (lawsuit) in the registry of deeds. Otherwise, the lien enforcement action can’t be successful. However, when a filed Massachusetts lien has been bonded off, and when suit is ultimately brought against that bond, the claimant won’t need to file a copy of that complaint with the registry of deeds. As mentioned above, the filed lien is dissolved once it is bonded off – so, that mechanics lien rule will not apply.
For more background:
Deadline for filing suit
Under § 14 of the Massachusetts mechanics lien statutes, a lien claimant must enforce their claim against the surety bond within the later of (1) 90 days after the lien was bonded off; or (2) 90 days after receiving notice of the bonded off lien. As mentioned in the section above – a claimant is not required to record their complaint against the bond claim in the registry of deeds (like a lien enforcement complaint would be). Of course, all of the normal service rules apply just like they would to any other lawsuit in Massachusetts.
Don’t be afraid when an owner or contractor threatens to bond off your lien, and don’t get too anxious if the lien does get bonded off. When a Massachusetts mechanics lien is bonded off, recovery doesn’t change all that much. Rather than filing suit based on the lien, suit is brought against the bond – and the funds are guaranteed if the claimant is successful. Still, when a lien is bonded off, it’s important to stay alert and weigh the potential options.