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Can a GC file a bond over the lien to remove the Mechanical Lien?

A demand letter was received from the contractor on a project that we've filed a mechanic's lien on. They mentioned that a Trade Contract Agreement was signed that obligates us to keep the property free and clear from all liens. By filing our mechanic lien for work that was unpaid, we have breached this agreement and need to remove the lien within a certain time period. If not, they will proceed with discharging the lien themselves, either by payment or bond, and deduct from any payment that is owed to us. Does a contractor have that ability to remove the lien themselves by filing a bond?

1 reply

Jan 30, 2020

It's common for a contractor to threaten to bond off a mechanics lien claim to try and scare a claimant into releasing the lien themselves. Further, it's also common for a contractor to contend that a claimant has breached their contract by filing a lien and that the claimant must remove the lien as a result. As I'll explain further below, both of those scenarios will actually present less of a threat to a lien claim than it seems. Before diving in, here's a resource that should be valuable: My Lien Was Challenged: What Do I Do?

Mechanics lien bonds

First, to answer the question: Yes, a contractor can discharge a mechanics lien claim filed against their project. However, a lien being bonded off doesn't just make the claim disappear. In fact, the claim remains alive and well - but, instead of enforcing the lien claim that's been filed, the claim would be enforced by bringing a lawsuit against the mechanics lien bond. So, just like a lien may need to be enforced by suit, a bonded off lien may also be enforced by lawsuit. Under Texas Property Code § 53-175, a claimant whose lien has been bonded off must enforce their claim against the bond within one year after receiving notice that the lien has been bonded off, or after the date on which the underlying lien passes its original enforcement deadline - whichever comes earlier. These two articles should provide a lot more insight into what happens when a lien is bonded off: (1) Don’t Be Afraid Of Threats To Bond Off Your Mechanics Lien: Explaining Mechanics Lien Bonds (2) Primer on Mechanics Lien Bonds and Bonding Off a Mechanics Lien

No Lien Clauses

It's extremely common for a construction contract to try and curb the use of mechanics liens against the project. However, Texas statute prohibits "No Lien Clauses" (i.e. contract clauses which purport to ban lien claims on the job). In fact, the Texas Property Code specifically prohibits waivers of lien rights which do not comport with the state's statutory lien waivers. So, trying to construct a de facto lien waiver in the contract shouldn't be effective - and lien rights should persist, even where a customer has tried to force the waiver of lien rights in the contract. Further discussion here: Can Texas lien rights be waived by contract?

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