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California legally requires a variety of individuals, contractors, and organizations to secure surety bonds to conduct business across the public service industry. Apply for a California Surety Bond today! Single Source Insurance is a leading California bonding company providing bonds with a convenient online application system. Browse the most common types of bonds in this state, or contact us for a full list.
California allows subcontractors, suppliers, and other professionals who have not been paid by a direct (prime) contractor working on a private project to file a mechanics lien against the project owner�s property. They can do this even if the direct contractor has already been paid by the property owner. (The mechanics lien process does not apply to public works projects, only to projects carried out on private property.)
Not paying off a mechanics lien can ultimately result in foreclosure on the lien, which could necessitate the sale of the property. The property owner is legally responsible for the debt represented by a mechanics lien regardless of what may already have been paid to the direct contractor. A direct contractor who has not been paid by the property owner has the same right to file a mechanics lien on the property.
Property owners have the option of purchasing a mechanics lien surety bond (also known as a mechanics lien release bond) to replace a mechanics lien against their property. The claim would still exist, but as a surety bond claim rather than as a mechanics lien claim conferring a security interest in the property.
If you�re a California property owner, you may need or want to purchase a mechanics lien bond to �bond off� (clear) a mechanics lien that gives the claimant a security interest in your property. The required amount of the bond (its �penal sum�) is 125% of the mechanics lien amount.
The surety company underwriting and issuing a California mechanics lien bond is essentially extending the property owner a short-term line of credit to pay off the obligation underlying the mechanics lien against the property. The surety company will pay that obligation on behalf of the property owner. The property owner then can petition for removal of the lien if the claimant doesn�t have it removed from the public record upon receipt of payment.
The property owner is legally obligated to repay the surety company. But the surety bond agreement typically allows payments to be stretched out over a certain period of time. In addition, there�s no need for the property owner to worry about being forced to sell the property once the mechanics lien has been bonded off.
Underwriting is required for California mechanics lien bonds because the surety bond company is taking a risk in extending credit to property owners. The company tries to mitigate that risk by making the property owner�s personal credit score the primary factor for setting the premium rate the property owner will pay to obtain a bond.
The higher the property owner�s credit score, the lower the risk of nonpayment, and the lower the premium rate. Property owners with great credit typically pay a premium in the range of 1% to 3% of the required bond amount.
Request a convenient online quote today, or call us to discuss the surety bond you may need to bond off a mechanics lien on your California property.
