What Will the Underwriter Need to Provide a Bond? 

Very few underwriters will consider writing these type bonds for accounts where they are not writing the Contract Surety Bonds.  However, as with most things, there is usually a market that will respond to these request for financially qualified principals.  They will usually require collateral to write these bonds. 

The information that will need to be provided: 

1. Copy of the lien;
2. As of 1/1/03 it will no longer be necessary to obtain a Court Order establishing the bond amount.  The amount of the bond or undertaking will automatically be set at  110% of the amount of the lien;
3. Completed surety bond application, contact us for the correct form;
4. Financial statements for the owner or contractor looking to discharge the lien;

Once this information is reviewed by the underwriter, collateral, if required, will need to be posted for the amount of the bond in the form of a Letter of Credit from an approved bank.  Collateral is normally required.  Exceptions may be made when the contractor is a regular account of the surety for which they are providing their Contract Surety bonds. 

The usual rate for these bonds is 2% of the bond amount.  However, where a Performance and Payment bond was provided on the project, the rate is discounted 50%. 

What is Required to Cancel the Bond? 

Once the bond is filed, the lien against the property or public funds is transferred to the bond. 

Private Projects 

Unless the lien is extended or a foreclosure action has been started, a private improvement lien will expire one year from the date of the filing of the lien.  A private improvement lien that has not been previously extended and does not concern a single- family dwelling, can be extended by the filing of an Extension of Mechanic’s Lien for Account of Private Improvement within one year of the original filing of the lien.  A private improvement lien that has previously been extended or that relates to a single-family dwelling can only be extended by court order.  A lien may be extended by court order for two successive one-year periods. 

Public Projects 

Unless extended or a foreclosure action has been started, a public improvement lien will expire one year from the date of its filing.   A public improvement lien that has not been previously extended can be extended for one year by the filing of an Extension of Mechanic’s Lien for Account of Public Improvement.  If the lien has been extended for one year by filing an extension, the lienor may extend its lien for an additional one year by court order.  A lien may be extended by court order for two successive one-year periods. 

Failing to file for an extension or starting a foreclosure action by the lienor automatically cancels the lien and by operation of law, cancels the bond that was provided to secure the lien.  For the underwriter to be assured that they have no further exposure on their bond, you must provide evidence that the lien was not extended and a foreclosure action was not commenced.   This evidence should be in the form of Court documentation. 

 Once the underwriter has reviewed and approved the cancellation evidence, any collateral that was taken on the bond will be returned. 

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Atlantic Coverage Corp.
6800 Jericho Turnpike, Suite 212E
Syosset, NY 11791
Phone: 516-682-5000
Fax: 516-682-5005
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