AFTER I OBTAIN A BOND ON A LIEN, WHAT DO I DO?
· Hire a lawyer and file the bond in Court, but only if you used an out of state insurer.
NY Lien law section 19(4) was amended in 2003 to allow the transfer of a mechanic’s lien to a bond without a court order. “Under the prior statute, the discharge of a mechanic's lien by bond was a judicial function which required at least two court orders—the first setting the amount of the bond and the second approving the undertaking and formally discharging the lien.
“Under the 2003 amendment, the court's role was substantially eliminated in routine bonding applications. Under paragraph (a) of the revised subdivision 4, the lien is discharged if the owner or contractor executes a bond or undertaking from a surety authorized to do business in New York in an amount equal to 110% of the lien amount. In addition, if a ‘certificate of qualification’ issued by the superintendent of insurance is filed with the bond in the County Clerk's office, and the bond is served on the adversary, the undertaking becomes effective and the lien discharged upon such filing and service.” Sanco Mech. V. DKS Gen. Contrs. & Constr. Mgrs., 34 A.D.3d 271 (1st Dept 2006).
In summary, as of 2003, there is no need for judicial participation in the transferring of a mechanic’s lien to a bond so long as the bond is underwritten by an authorized and certified insurer and filed with the county clerk (and properly served).
Notwithstanding the new legislation, we still see bonds transferring mechanic’s liens being brought before a court. A recent example was in West Flooring v. Romeo (Suffolk County 2019). There, for whatever reason, the defendant general contractor asked a court to allow it to file its bond with the county clerk. Denying the general contractor’s request, the court noted, “paragraph (a) provides for discharge of a lien upon such service and filing without need for a court order; had the [general contractor] demonstrated compliance with paragraph (a), their request would be academic.” In sum, the client’s money was wasted.
If you believe the bond you obtained or your insurance carrier may not be authorized and certified in New York, contact a good New York lawyer and find out. You’ll save some money and will be happy to know you got a good lawyer.
-Mat Paulose Jr., Esq.