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Any insight into bonding around a lien in Texas?

We as the General contractor need information on a Bond Around for a lien. How do I do a bond around if I get a lien on a project? How much would that cost? Can I get a letter of credit instead of paying for a bond around? I have a subcontractor that has not paid his trucking bills, $274k and they have sent us a Notice to lien. They intend to lien the project 2/9/17 if they are not paid. We as the General contractor do not have that much money to designate to this lien. What are my options?

1 reply

Jan 23, 2019

That's a good question, and I'm sorry to hear about your situation - facing unexpected liens due to a sub's failure to pay is incredibly frustrating. In order to bond around a Texas mechanics lien, a contractor must file a bond that abides by § 53-172 of the Texas Property Code with the county clerk of the county where the lien was filed. That bond has to provide a description of the property, it must refer to each lien claimed, and it must be in an amount either 1.5x the amount of the lien, or the sum of the lien + $40,000 (whichever is greater). Unlike some other states, it does not appear that cash or a letter of credit may be substituted in lieu of a surety bond. As far as the cost of such a bond - that could vary from surety to surety, and it will also vary based on a number of other factors (like the contractor's creditworthiness and other financial information about the contractor). Generally, the lesser the risk that the bond will be paid out, and/or the lesser the risk that the contractor won't be able to make payment to the surety, the lesser the price of the bond. Many surety companies have made it particularly easy to chat and to get a quote - such as Surety One - so pricing out different companies shouldn't be too terrible of a burden. Finally, this article may be useful (if not a little general): Primer on Mechanics Lien Bonds and Bonding a Mechanics Lien.

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