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Is a Lien Waiver prior to work performed legal if a Payment Bond is issued as a substitute?

IllinoisBonding Off LienPayment BondRight to Lien

I am a land owner who has leased several tracts of land to construction companies. The construction companies are allowed to hire contractors to perform work, erect buildings etc...on the property. Although my contracts say that the construction companies are not to allow liens to be put on the property, sometimes their slow pay process, does cause contractors to place mechanics liens against them, and on the property that I own. I want to avoid allowing liens on the property that I own by my Lessee and the way that they conduct business. If I require the construction company to obtain a payment bond prior to the work being performed, can I require a lien waiver or subordinate the lien somehow to the Payment Bond?

1 reply

May 18, 2020
If there's a payment bond secured for construction, and if that bond is properly recorded in the property record, then mechanics liens filed for work done on the property would automatically divert to the bond and wouldn't serve as a charge against the property title. Levelset discusses that here: Bond Claims on Texas Private Projects. Further, if the lease requires that lessees bond off any mechanics liens filed against the property, then they'd be responsible for making sure all liens are quickly removed by bonding off the lien. It's extremely common for a lessor to include a lease provision stating that the lease will be terminated or the lessee will be in breach if a lien claim isn't released or bonded off within X number of days after it's filed. With that being said, no lien clauses are generally not allowed in Texas, but it doesn't look like lien subordination clauses are prohibited. And, I'm not sure that having a payment bond present will change that. Still, consulting with a Texas construction attorney will help to clarify that, plus they'll be able to help review and update your leases.
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