Insurance & LiensQuestion 1557 of 1632

After an owner records a lien release bond of 125%, an unpaid subcontractor who wants to be paid must now pursue:

a.The CSLB, which holds the contractor's licence bond for claimants
b.The surety on the release bond, and the bond's principal
c.The construction lender, whose loan funded the improvement work
d.The real property, by foreclosing the lien the bond replaced

Explanation

Recording a release bond under Civil Code §8424 substitutes the bond for the property, so the claimant's action runs against the surety and the principal rather than against title. (d) is the step the bond was recorded to foreclose, and pursuing it is the error the section exists to prevent. (a) misroutes a claim: the §7071.6 licence bond is claimed against its surety, and the CSLB holds no money. (c) reaches the wrong party — funds in the lender's hands are the target of a bonded stop payment notice, a separate remedy with its own notice conditions.

Law Reference: Civil Code §8424

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Reviewed by Abraham Chen — Licensed California General Contractor (CSLB License #1101856 — verify)
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