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Take 60% Cash or Take a "Bond Off"

CaliforniaBonding Off LienLien ForeclosureMechanics LienRecovery Options

Clean Cut Concretee is a Levelset customer. Desiree is our ccount manager. Project is called Tru Fusion. General Contractor has not paid. Lien filed. GC just called offerring 60% cash in exchange for an unconditional lien release. Said that the customer is going to "Bond Off." We have no experience with this. We think that we should stay with the Bond Off process as all of our paperwork is in order, rather than accept 60%. GC is giving us an hour to decide, so feeling urgent. Thank you

1 reply

Jul 18, 2019
I'm really sorry to hear about this - no one should be bullied into accepting less than what they're owed. While I can't advise on whether or not to accept partial payment, I can provide some information about what happens when a lien is bonded off. With that in hand, it might be easier to come to your own determination.

When a California mechanics lien is bonded off, the claim doesn't disappear, and the claimant isn't really all that disadvantaged. Instead of the claim attaching to the underlying project property, the lien is actually more or less transferred to a surety bond. So, rather than the property title being on the line, potentially - there's a bond (which you can think of as an insurance policy or a pile of money). When a lien is bonded off, that means there's definitely money to pay off the lien claim - so, when a claimant is confident in their claim, a threat to bond off a lien is typically not all that scary.

The timeline for a claim is changed a bit when a lien is bonded off, though. Normally, when a California mechanics lien claimant files their lien, the claimant will have to enforce their filed lien claim within 90 days of filing the lien (if payment can't be obtained). But, when a lien is bonded off, the lien claimant will have a lot more time before legal action is required on their part. Under § 8424(d) of the California Civil Code, a lien claimant whose lien is bonded off will have 6 months from the date they receive notice the lien was bonded off to file an enforcement action against the bond. Certainly, this provides much more time to try and resolve the dispute. And, if the dispute can't be resolved, the end result would be the same - an action to enforce the claim against the surety bond isn't all that different than an action to enforce a lien against the project property.

Of course, it's also worth keeping in mind that lien or bond enforcement actions can potentially be expensive endeavors since they constitute full-blown lawsuits. Granted, at the same time, a claimant doesn't automatically have to file a lien enforcement suit, either. In fact, sending a warning or threat to enforce a filed lien - like a Notice of Intent to Foreclose can help show a contractor and owner that the lien claimant is serious about payment. In the face of a threat to bond off a lien, a claimant countering with their own threat might be an appealing option.
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