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.
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.