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In the construction industry, disputes over bonds and liens are common and often complex. These legal tools are designed to protect parties down the payment chain—especially subcontractors, suppliers, and laborers—who may otherwise have limited recourse when payment issues arise. However, when improperly managed, bonds and liens can trigger legal battles that delay projects and damage business relationships.
A mechanic’s lien allows a party who has provided labor or materials to a property to place a legal claim against that property if they are not paid. It creates a powerful incentive for owners and contractors to resolve payment disputes quickly but can also lead to litigation if the lien is contested. Mechanic’s lien laws vary by state, and strict deadlines and notice requirements must be met for the lien to be enforceable.
On public projects where liens against government property are not allowed, surety bonds serve a similar purpose. A payment bond guarantees that subcontractors and suppliers will be paid, while a performance bond ensures the contractor completes the project according to the contract. Disputes can arise when a bond claim is denied, when a surety questions the validity of a claim, or when performance is allegedly deficient.
Common causes of bond and lien disputes include unclear contract terms, delays in project completion, nonpayment due to change order disagreements, or insufficient documentation of work performed. These disputes often involve multiple parties, each with their own contracts and interests, making resolution legally and commercially challenging.
To minimize risk, contractors and subcontractors should maintain accurate records, issue timely notices, and understand the specific lien and bond laws in their jurisdiction. Proactively managing contracts, payment schedules, and documentation can reduce the likelihood of disputes. And when issues do arise, seeking legal advice early is key to protecting your rights and avoiding costly project interruptions.
