Bonds to Remove Liens

By: James C. Busch

In the State of Georgia, once a lien is properly prepared and recorded the effected property is then encumbered. The encumbered property will remain so until the lien is paid off, settled, or bonded off the property.

The process to bond off a lien was established to clear the title to the property while the issues surrounding the lien were resolved. Thus, if a builder needs to close a property, but can not timely resolve the lien issues to his satisfaction, he or she can bond off the lien and allow the closing to take place. The phrase “bonding off” describes the process whereby the property owner places with the appropriate court sufficient collateral to cover the amount claimed in the lien.

The process for bonding off a residential lien differs from that of a commercial lien. If the liened property is residential, the bond must be in the amount of the amount claimed under the lien. If the property liened is commercial property, the bond must be in an amount double the amount of the lien.

The bond itself must promise or be conditioned to pay the lien claimant the sum that is found to be due by the appropriate trial court. This action to recover from the debtor must be commenced within twelve months of the date the lien became due. The actual form of the bond must be approved by the Clerk of the Superior Court in the County where the property is located. The bond may take the form of cash or separate real property may be used to secure the release of the lien. If real property is used, the debtor must provide the complete legal description, owner of record, any liens and encumbrances, the market value of the property and all such information be provided in an affidavit which is recorded with the bond.

As a practical matter, liens are far more likely to be bonded off on a commercial project than a residential. This reality is the result of general contractors and property owners on commercial jobs requiring all sub-contractors to bond off all liens filed by their suppliers, laborers, or subcontractors with a certain time period or be subjected to stringent penalties.

While many suppliers initially are troubled by the recording of a bond, they should view the bond as an excellent collection opportunity. By placing a bond with the court, the debtor has placed funds or assets with an unbiased, neutral third party. Thus, the suppliers should timely and vigorously pursue its lawsuit against the debtor because once this issue is successfully tried before the Court, the supplier has an immediate source to timely collect its funds.

Mr. Busch is an attorney specializing in commercial and construction litigation for Busch, Reed, Jones & Leeper, P.C. in Marietta, Georgia