- Bonding Private Construction Liens in Kentucky
- January 29, 2010
- Law Firm: Dressman Benzinger LaVelle psc - Crestview Hills Office
- A mechanic’s lien filed against a private construction project in Kentucky has many undesirable effects. It will cloud title to the property and interrupt financing for the project, if you are the owner. If a lien is filed by a subcontractor, it will likely result in the owner freezing payments to the general contractor. Making matters worse, the lien will be difficult to remove quickly, regardless of whether or not it has merit. A lien claimant has one year from the date of the recording of a lien on a private project in Kentucky to file suit to enforce the lien. Suits to foreclose on liens can take months or even years to resolve. Owners and general contractors in Kentucky possess a handy tool with which they may avoid some of the negative effects of a lien on a private project in Kentucky: the construction lien bond.
Section 376.100 of the Kentucky Revised Statutes sets forth the procedure for “bonding off” a lien on a private Kentucky project. Essentially, the owner or general contractor may file a bond with the county clerk in lieu of suffering the effects of the lien. The bond must be in an amount that is twice the amount of the lien. The bond secures payment to the lien claimant in the event the lien is determined to be legitimate.
To discharge the lien, an owner or general contractor must first obtain the bond commitment from a good surety and pay a bond premium. Next, the bond document is issued by the surety and must be executed before the county clerk for the county where the lien was filed. A lien must be bonded before a judgment is rendered enforcing the lien. If satisfied with the surety and the bond document, the clerk will sign the bond and the lien will be discharged. Upon such bonding, the lien no longer renders title to the property unmarketable. Construction payments can again continue.
Of course, the bonding off of a lien does not relieve the owner and/or general contractor of the liability for the underlying debt, if that debt is valid. The bond, rather, avoids the negative effects of the lien prior to the time at which the merits of the underlying debt are adjudicated.