Unfortunatley in construction when someone in the contract chain is not paid it usually has a trickle down effect. For example, if the general contractor is not paid, it is likely that the general contractor then will not pay its subcontractors and the subcontractors will not pay their materialmen and so on. At the end of the day this usually means that if one person files a mechanic’s lien on a construction project there is a very good chance others will file mechanic’s liens as well. In these situations I am often asked what the owner can do when multiple mechanic’s liens are filed on the same piece of real property? More specifically, the owner will want to know whether it can bond all of the liens at once and deal with them that way. The answer is yes, but its not as easy as it sounds. First of all, you still have to obtain a separate mechanic’s lien discharge bond for each and every mechanic’s lien. The mechanic’s lien discharge bond is governed by Lien Law Section 19(4). You can obtain multiple discharge bonds at the same time but there is no one “super bond” that the owner can obtain.
The one exception is where the owner has utilized Lien Law Section 37 to obtain the “bond to discharge all liens.” The Bond to Discharge all Liens automatically bonds off any mechanic’s lien and prevents any mechanic’s lien from attaching to the property. The catch is that the Lien Law Section 37 Bond to Discharge All Liens must be obtained before the liens are filed. For more information on the bond to discharge all liens click here.
For those owners that have not had the foresight to utilize Lien Law Section 37 at the beginning of the project, the only option when faced with bonding multiple mechanic’s liens is to obtain a separate discharge bond for each and every lien. A good construction attorney and a good surety can help you streamline the process and hopefully expedite obtaining each of the different discharge bonds that will be necessary.
Vincent T. Pallaci is a partner at the New York law firm of Kushnick Pallaci, PLLC where his practice focuses primarily on the area of construction law. He can be reached at (631) 752-7100 or firstname.lastname@example.org