Bond to Release a Mechanic's Lien


Private Property

KRS 376.100

The owner or claimant of property against which a lien has been asserted under KRS 376.010 may at any time before a judgment has been rendered enforcing the lien, execute before the County Clerk where the lien was filed, a bond for double the amount of the lien claimed with good sureties to be approved by the clerk. Conditioned upon the obligors satisfying any judgment that may be rendered in favor of the person asserting the lien. The clerk shall preserve the bond and upon its execution, the lien shall be discharged.

It is recommended that the only surety a clerk accepts is an insurance bond by an approved insurance company that is in good standing with the Kentucky Department of Insurance. While the clerk is only approving the surety, it can be in many forms, such as, certificate of deposit, cash, certified or cashier's check or property, etc, an insurance bond is preferred. Every other form of surety, other than an insurance bond, forces the clerk to take other steps to preserve the surety.

Detailed information on other forms of surety can be found in the section on BOND TO RELEASE A MECHANICS LIEN - Public Property.

SURETY BY A LICENSED INSURER

When accepting a surety bond by an insurance company the clerk must make certain the insurance company is in good standing with the Kentucky Department of Insurance. Each clerk should have a list of such insurance companies. KRS 304-21.201 (2)(3) states that the county clerks will be provided this list by March 1 of each year. These companies can also be verified by contacting the Kentucky Department of Insurance at 502-564-3630. Their address is PO Box 517 Frankfort KY 40602-0517. An example of the insurance bond is on the next page.

The surety bond is recorded along with the release document.

The document must have:

The name of the party asserting the lien

The name of the party the lien is against

The surety bond must be attached to the release.

There must be a place on the document for the clerk's approval of the surety.

The bond must be double the amount of the lien.

Preparation Statement (KRS 382.335)

Reference where the lien is recorded (the book and page)

The clerk shall request a return mail address (KRS 382.240)

PUBLIC PROPERTY

KRS 376.250 House Bill 259

Prior to judgment a bond to release a lien may be executed before the county clerk in the county in which the lien was filed.

The bond must be double the amount of the lien claimed.

The clerk shall approve the bond only if the bond is secured by:

1. Cash

2. A letter of credit from a bank

3. Surety by a licensed insurer


CASH

The definition of cash is bills, coins, cashier's check, certified check or money order. Any form of cash receipt must be deposited in the bank. Holding a certified check, cashiers check does not meet the requirement of cash. The bank can cancel the certified check. A business check or check from an attorney is not acceptable unless it is certified.

If the bond is paid in cash, check or money order, a separate escrow account for safekeeping must be set up for each bond. This is very important to insure that this money is not co-mingled with any clerk fee or any other bond.

The county clerk would return the money after receiving a properly executed release of the mechanics lien by the legal holder of the lien or upon a court order.  The county clerk must have the bank issue a cashier's check out of the specific escrow account established for this bond. That account should be closed and not reused. The county clerk must keep all records associated with these transactions with their accounting records. This is an item that will be reviewed by auditors.

A LETTER OF CREDIT FROM A BANK

A letter of credit from a bank must be an original, on bank stationery and must be signed by an officer of the bank. The letter of credit must state that it is irrevocable. Even though this is not in the statute, a revocable letter of credit would not satisfy the term bond.

The letter of credit must be maintained by the clerk's office in a secure location as you would any other secured document (such as a will), or in a lock box or safety deposit box.

It is important to treat a letter of credit as if it was cash. It is the clerk's backing for the bond. A photocopy of the letter of credit is recorded along with the release document.

The county clerk would return the letter of credit after receiving a properly executed release of the mechanics lien by the legal holder of the lien or upon a court order.

SURETY BY A LICENSED INSURER

When accepting a surety bond by an insurance company, the clerk must make certain the insurance company is in good standing with the Kentucky Department of Insurance. Each clerk should have a list of such insurance companies. KRS 304-21.201 (2)(3) states that the county clerks will be provided this list by March 1 of each year. These companies can also be verified by contacting the Kentucky Department of Insurance at 502-564-3630. Their address is PO Box 517 Frankfort KY 40602-0517.

  • The document must have:
  • The name of the party asserting the lien
  • The name of the party the lien is against
  • The surety bond must be attached to the release.
  • There must be a place on the document for the clerk's approval of the surety.
  • The bond must be double the amount of the lien.
  • Reference where the lien is recorded (the book and page)

The clerk shall request a return mail address (KRS 382.240)

Fee Schedule