Section 2.1.7.2 Release of Lien Bonds

• Jurisdiction: Arizona

Lien Release Bonds: An owner on a private construction project can arrange for the assurances that no mechanics' liens will attach to his property.

The nature of the release of lien bond is similar to a payment bond, and is for the sole purpose of protecting those performing labor, professional services, providing materials, machinery, fixtures, or tools to the general contractor or his subcontractors.

Under A.R.S. Sec. 33-1003, an owner who enters into a construction contract can be assured that no one supplying labor or materials to the contractor or subcontractor can obtain a mechanics' lien against the property.

If the owner requires a payment bond from the contractor and records it together with a copy of the construction contract, then no lien will be allowed arising out of the work performed under the contract, except by a person who contracts in writing directly with the owner.

The purpose of a payment bond in a private setting is to provide security for laborers, materialmen, and subcontractors, where security is not otherwise available (such as on public projects).²⁰ The release-of-lien bond, in the absence of a general contractor posting a payment bond, prevents the filing of liens where they would otherwise be available by the recordation of a payment bond.²¹

The release-of-lien bond or payment bond allowed under A.R.S. Sec. 33-1003 must be in the full amount of the construction contract between the owner and contractor. The bond can be issued at any time, thereby avoiding liens after recordation of the bond. Essentially, a payment bond in lieu of lien rights must be in the amount and form prescribed by Arizona's Little Miller Act.²² The bond, together with a copy of the contract, which must contain the legal description of the land upon which the project is to be built, must be recorded with the county recorder for the county in which the land is located. Failure to comply with these requirements can result in the court determining that the bond is not a statutory bond in lieu of lien rights.²³

Professionals Included: A payment bond recorded in compliance with A.R.S. Sec. 33-1003 is solely for the protection of claimants performing labor or professional services, or furnishing materials, machinery, fixtures, or tools to the contractor or one of its subcontractors.²⁴ However, as with the list of potential lien claimants under the mechanics' lien laws,²⁵ the legislature has brought uniformity to the bond in lieu of lien rights by...