Transferring a Construction Lien to a Payment Bond (if the Payment Bond was Not Recorded with the Notice of Commencement)

You are an owner or contractor on a private construction project.  As an owner, you paid for the contractor for furnish an unconditional payment bond to exempt your property from construction liens.  As a contractor, you furnished the payment bond.

But, the payment bond was never recorded in the official records with the Notice of Commencement.  What does this mean since the payment bond is supposed to be recorded with the Notice of Commencement?  Well, lienors such as subcontractors and suppliers do not know about the payment bond and will preserve their construction lien rights and record a construction lien if they are not paid.  But, wait…you thought the payment bond operates to exempt the real property from such liens.  It does and it will.  However, if the payment bond is not recorded with the Notice of Commencement (meaning lienors do not know about the bond) the owner or contractor can record a Notice of Bond in order to transfer the construction lien to the security of the payment bond.  Thus, the payment bond will operate as intended.

 

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.

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