It’s not uncommon for disputes over payment to lead to liens being placed on properties where projects are underway. A lien bond is an essential tool for contractors. It helps remove a lien on real estate without upfront cash or certified checks. Instead, the lien bond provides security while the court resolves the dispute.

Contractors face significant delays and increased project costs when a lien is placed on a property. It can also jeopardize relationships with project owners. Acquiring a lien bond allows contractors to remove the lien from the property. This enables construction to proceed while the court addresses the issue.

What is a Lien Bond?

A lien bond is a surety bond that contractors request to remove a construction lien from a property. Subcontractors, suppliers, or other parties often file the lien. They claim they haven’t received full payment for their work or materials. A filed lien can cloud the property’s title and halt the project until resolved.

Instead of posting cash or a certified check, contractors can obtain a lien bond from a surety company. The bond guarantees payment to the lien claimant if the court rules in the contractor’s favor. This process allows the project to continue without delay while waiting for the final judgment.

Why Do Contractors Need a Lien Bond?

In the high-stakes world of construction, time is money. A lien on a project can disrupt schedules, put financing at risk, and create conflict with project owners. By securing a lien bond, contractors can avoid these costly delays. The lien is removed from the title, allowing the project to move forward, while the dispute is settled in court.

Additionally, a lien bond reassures project owners that the contractor is committed to resolving the issue and completing the project. It’s an essential tool for maintaining trust and ensuring that all parties involved can move forward with confidence.

Real-World Example of a Lien Bond in Action

Imagine a large commercial project in Vaughan where a supplier claims they have not been fully paid for materials provided to the contractor. As a result, they place a lien on the property. This action halts the project, complicates financing, and frustrates the project owner. Instead of paying the lien claim upfront, the contractor secures a lien bond with their surety company, removing the lien from the property and allowing construction to continue. The court will eventually decide if the lien claim is valid, but in the meantime, the contractor has maintained positive relationships with the project owner and kept the project on schedule.

How Lien Bonds Work

Once a lien is placed on a property, the contractor can apply for a lien bond with their surety company. The surety will assess the contractor’s financial stability and relationship with the claimant before issuing the bond. The bond amount typically covers the full value of the lien claim, and it serves as a replacement for cash or a certified cheque. The lien is removed from the property, and the bond acts as a security measure pending the court’s final decision.

If the court rules in favour of the lien claimant, the surety company will pay the claim on behalf of the contractor. However, like other types of surety bonds, the contractor is ultimately responsible for reimbursing the surety for the full amount paid.

Why Choose Ferrari & Associates for Lien Bonds?

At Ferrari & Associates, we understand the complexities of the construction industry. Since our founding in 2009, we have built strong relationships with contractors across Toronto and the Greater Toronto Area, helping them navigate the challenges of securing bonds, including lien bonds. Our team is fluent in the prequalification and bonding process, and we work diligently to help our clients keep their projects on track.

Whether you need a lien bond, bid bond, or performance bond, our surety professionals are here to help you succeed.

Get Your Lien Bond Today

If you need a lien bond to remove a lien from your construction project, Ferrari & Associates is here to assist. Contact one of our two conveniently located offices in Vaughan or Oakville, and let our experienced team guide you through the process of securing the bond and keeping your project on schedule.

*The information on this page serves informational purposes only. Therefore, it should not be considered insurance advice. For actual insurance advice, please contact Ferrari & Associates at 1-888-467-8989