Today, I would like to discuss how to properly cancel or discharge a Mechanic’s Lien, which is also sometimes referred to as a Release of Lien Bond. One way to properly cancel or discharge a Mechanic’s Lien is to file a satisfaction of lien — if the lien was satisfied. The satisfaction should be filed with the county clerk and should include proof of filing, such as a stamp that says “Filed” on it from the courthouse and a printout of the lien docket showing that the lien has been satisfied. The surety will accept this way to cancel the bond if you actually pay the lien or what was owed.
Another thing we always suggest is that when you are settling with the Lienor prior to making payment, it’s always best to obtain a satisfaction of the lien that you’re going to hold in escrow pending payment. Once the payment goes through, you are allowed to file a satisfaction.
The reason why I suggest if you are the party satisfying the lien, you should hold it in escrow and file it, is that once money is paid to a party, there are a lot of times when they either sit on the filing or they don’t file it in a timely manner. Up until it’s filed, the matter is not properly canceled. We had a case where the lien was satisfied and the counsel for the lienor never filed the satisfaction which essentially left their bond in some sort of legal limbo until it was filed.
If litigation has started, another way to cancel a bond is to get a court order canceling it. Once the court order is issued, you have to serve it on the other side, and then the surety will generally wait for 30 days to formally cancel the bond. The reason why they wait 30 days is so the time to appeal in New York State lapses. Once the time to appeal has lapsed, you have a final court order, so the bond can be canceled.
Another way to cancel a bond is filing what is called a Release of Mechanic’s Lien Bond with the county clerk. Maybe you come to a settlement where it’s not a full satisfaction. Neither party wants to write in the amount that was paid, and they can execute a Release of Mechanic’s Lien, which is a final release, which releases all the lienor’s claims to the Mechanic’s Lien, the bond and the property, and essentially removes the lien of record.
The final way to release a Mechanic’s Lien bond is where a lien has been filed, litigation has not started, and the time to renew the lien has lapsed. What a surety will do, especially when collateral is not being held, is take this as more of an informal cancellation of the bond, where the party obtains a printout of the lien docket, and their counsel provides a letter stating that no litigation has started; the time to extend the lien has lapsed; and the surety no longer has liability.
The attorney will need to search the New York State Electronic Court Filing system to prove that no litigation has started, the time to extend the lien has lapsed, and the attorney signs this affirmation or affidavit and provides it to our office along with the docket printout as verification. The surety will most of the time, elect to cancel the bond based on this. I say this is an informal way since the bond is being canceled as a matter of law since the lien has not been extended past one year, and no litigation has started and there’s nothing formally canceling the bond or specifically stating that the bond is canceled.
Those are the ways of canceling or releasing Mechanic’s Lien Bonds. This is good to know, especially for construction attorneys or attorneys who have clients that deal with Mechanic’s liens from time to time.
Neil Pedersen
PEDERSEN & SONS SURETY BOND AGENCY, INC.
15 Maiden Lane Suite #800
New York, NY 10038
212-227-7277
800-720-7277
neil@courtbondnow.com
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