Facing a surprise mechanic’s lien right before a major real estate closing or refinance can be a nightmare. While many people might try filing a lawsuit to have the lien removed, there is a far more efficient statutory process in Texas that allows for bonding around the lien.
What Does It Mean to "Bond Around" a Lien?
When a contractor files a lien, it attaches to the real property, creating a "cloud" on the title that prevents title insurers from issuing clean title policies. Bonding around the lien involves filing a Bond to Indemnify Against Lien with the county clerk.
Under Texas Property Code Chapter 53, Subchapter H, this process essentially discharges the lien from the property and attaches the contractor's claim to the bond instead. This allows the property owner to proceed with their sale or refinance as if the lien had been released, while the contractor’s financial interest remains secured by the bond.
The Statutory Requirements and Costs
The process is governed specifically by Texas Property Code §§ 53.171 through 53.175. To be effective, the bond must meet strict financial thresholds based on the amount of the lien:
- Liens under $40,000: The bond must be double the amount of the lien claim.
- Liens of $40,000 or greater: The bond must be the greater of 1.5 times the lien amount or the sum of $40,000 plus the lien amount.
Because this requires a surety company to issue a guarantee, the owner typically has to provide collateral—such as cash or other property—and pay a premium. This option is often more attractive in commercial deals where the cost of waiting to close or refinance far exceeds the cost of the bond.
The Clock is Ticking for Lien Holders
Once the bond is filed and the clerk issues the proper notices, the burden shifts to the contractor (the lien holder). They no longer have the leverage of blocking a closing.
To collect on their claim, the contractor must file a lawsuit against the surety and the person who owes them the money within a specific timeframe. According to Texas Property Code § 53.175, the claimant must bring suit within one year of the date the bond was recorded (or within one year of the date the claim becomes enforceable, depending on the project type). If they fail to file suit within this window, the claim against the bond is generally lost.
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