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Can You File a Bond Claim on a Commercial Project?

On Aug 04, 2017 by

Reading Time: 3 minutes

Mechanics liens are the general go-to security instrument to ensure payment on construction projects. Sometimes however, a potential claimant with a payment issue on a project may not want to file a mechanics lien, and wants to explore other options instead.

Since bond claims are to public projects what mechanics lien claims are to private projects, you may find yourself wondering: Can I file a bond claim on a commercial project?

The answer to that question, like many things in construction payment, is “it depends.” To find out what it depends on, read on.

In Order to File a Bond Claim – There Must be a Bond

This sounds so simple that it seems like a joke, but it’s important to take a step back and realize that this is a specific, absolutely necessary requirement of any potential bond claim. While all mechanics lien needs is a construction project on some piece of privately owned property, a bond claim requires something else: a bond.

If there is no payment bond on the project against which a claim may be made, then there’s simply nothing to make a bond claim against.

A payment bond is really just a big pile of money, set aside just in case a company doesn’t get paid and needs to file a claim

Unlike a right against the property, a bond claim needs something to be created against which the claimant can exercise a right. At its most basic, a payment bond is really just a pile of money (or, really, it’s the word of a large company – the surety –  guaranteeing that such a big pile of money exists somewhere) against which project participants can recover if they remain unpaid.

But, if there is a bond, the question changes from “Can I file a bond claim on a commercial project?” to “Can I file anything other than a bond claim on this commercial project?”


Further Reading: What Are Performance and Payment Bonds?


If There Is a Bond – That’s the Recovery

Generally, only the largest private companies and property developers mandate the use of payment bonds on private projects. Since the ability to bond off a lien exists after a lien is filed, there’s just not really too much incentive to tie up that much bonding capital on projects where it is not required.

However, if a payment bond is established for the benefit of the project participants on a private project, the bond is the remedy against which claimants can recover in the event of a project payment dispute.

The reason to obtain a bond in a commercial project setting is to keep the property free form liens. A lien being filed will trigger an action to release it and make the claim against the bond, to the extent the claim is valid.

So, the answer to the question of whether a claimant may file a bond claim on a commercial project instead of a mechanics lien really ends up being pretty simple – it can just be re-phrased as “Is there a payment bond on this project?” and the answer is the same.

Claimants who don’t want to file a mechanics lien should determine whether the project is bonded, obtain a copy of the payment bond, and comply with the requirements therein (or by statute to the extent the requirements conflict), if they wish to make a claim.

Learn how the bond claim process gets you paid in this essential guide:

Download the Bond Claim Process Guide


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Can You File a Bond Claim on a Commercial Project?
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Can You File a Bond Claim on a Commercial Project?
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A bond claim may be filed on a commercial construction project if and only if a payment bond exists | If a payment bond exists, then it is the remedy for payment issues
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zlien
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On Aug 04, 2017

by

Nate, along with being a husband, father, Eagle Scout, Teen Jeopardy! contestant, and musician, is the Chief Legal Officer and General Counsel at zlien, a vertical SaaS platform designed to help construction industry participants by promoting a collaborative construction payment process. Nate was recently recognized as one of the nation's Top General Counsels, and is working to get better at it every day. Nate is a licensed attorney in Louisiana and Texas, and a graduate of Stanford University (B.A.) and Tulane Law School (J.D.). He manages and oversees the Lien Genome and zlien's products, processes, and resources, directs the Construction Payment Blog, protects zlien's interests and intellectual property, and performs general counsel duties.

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