4.3.4.2.1 Bonds in Lieu of Lien Rights

• Jurisdiction: Arizona

A construction project owner can assure that no mechanics’ lien will be recorded on his property merely by recording a payment bond at the onset of construction. If a payment bond, conditioned in accordance with A.R.S. § 33-1003, is properly recorded, “no lien shall thereafter be allowed or recorded by the person claiming a lien against the land on which the labor or professional services are performed or the materials, machinery, fixtures or tools furnished [.]” This type of bond is often referred to as a lien avoidance bond or a Bond in Lieu of Lien Rights. The only exception to this prohibition of lien rights is for the prime contractor (the principal on the bond), who still may look to the equity in the property to secure its right to payment.

To receive the protection of a Bond in Lieu of Lien Rights, certain statutory requirements must be followed. First, the bond must be in the full amount of the...