The Purpose of Lien Transfer Bonds (to Transfer the Construction Lien)

Remember that construction liens can be transferred to a lien transfer bond to transfer the lien from the real property to the security of a bond.   Thus, when the lienor forecloses on its lien, they are not foreclosing on the real property through a lien foreclosure action, but are foreclosing its lien as to the lien transfer bond.

However, you cannot foreclose your lien against both the real property and the lien transfer bond. In a recent case, subcontractor foreclosed its lien on the real property and the lien transfer bond. For unbeknownst reasons, the subcontractor elected not to dismiss the real property owner so that it only pursued the lien transfer bond. This is a hard strategy because the subcontractor could not prevail in both foreclosing its lien on the real property and the lien transfer bond; again, the point of the lien transfer bond is to transfer the lien from the real property to preclude the foreclosure as to the real property.   By implementing this strategy, the subcontractor was exposing itself to having to pay the real property owner’s attorney’s fees when the court found that the owner had no liability by virtue of the lien transfer bond. This is what happened as the appellate court held: “It is well established, as a matter of law, that a determination that Seaside’s [real property owner’s] transfer of the [subcontractor’s] lien to the Travelers [lien transfer] bond precluded liability against Seaside.” See Key West Seaside, LLC v. Certified Lower Keys Plumbing, Inc., 40. Fla. L. Weekly D2052b (Fla. 3d DCA 2015).

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

This entry was posted in Lien, lien transfer bond and tagged , , , , . Bookmark the permalink.