What is a lien bond?

A lien bond serves the specific purpose of protecting property owners from potential liens that may arise from contractors, subcontractors, or suppliers who claim they have not been paid for work or materials provided for a property. When a contractor or subcontractor is involved in a project and performs work, they may legally place a lien on the property if they are owed payment.

By securing a lien bond, the contractor effectively guarantees that the owner’s property cannot be encumbered by these liens, thereby providing the owner peace of mind and a form of security in case disputes arise over payment. This mechanism is particularly useful in protecting the property owner's interests, allowing the construction project to proceed without the fear of attachments to the property that could complicate ownership or the ability to sell or refinance the property in the future.

Other options provided do not accurately describe a lien bond's function or purpose in the context of construction law. For example, while bonds can secure performance or guarantee loans, they do not function within the same context as a lien bond meant specifically for addressing creditor claims against a property.