LIEN AND BOND INFORMATION
NOTICE TO OWNER
“Chapter 672E of the Hawaii Revised Statutes contains important requirements you must follow before you may file a lawsuit or other action for defective construction against the contractor who designed, repaired or constructed your home/facility. Ninety days before you file your lawsuit or other action, you must serve the contractor a written notice of any construction conditions you allege are defective. Under the law, a contractor has the opportunity to make an offer to repair and/or pay for the defects. You are not obligated to accept any offer made by a contractor. There are strict deadlines and procedures under the law, and failure to follow them may negatively affect your ability to file a lawsuit or other action.”
LIEN AND BOND NOTICE TO CLIENT
By law, we are required to provide you notice of our rights to a mechanics lien for work and materials provided by Foundation Systems Hawaii, LLC (FSH) for your project. We are also required to provide you notice of your right as our customer to require a bond. A description of both are outlined below.
LIEN AND BOND DESCRIPTIONS
A lien is a claim against property to secure a debt. Liens that secure payment of debts owed to construction subcontractors for the value of work performed, and materials furnished, on a construction project, and quite common in the United States, and generally arise by operation of state law based on the consent of the land owner to have his/her land improved. Lien may be one of several legal tools at a subcontractors disposal to ensure payment, but a lien is generally the most effective tool because it encumbers the improved real estate in much the same fashion as a mortgage or a judgment, effectively preventing resale. While all liens include the legal right to have a debt satisfied by forced sale of the property serving as security for the underlying debt, the procedure to perfect a lien, that is, to make the lien legally enforceable, varies greatly from state to state. Those differences cannot be ignored, for the courts generally require strict compliance with the applicable lien statutes if the lien is to be valid; substantial compliance does not suffice. For these reasons, there is probably not an attorney in the country who could claim to be an expert on all of the lien laws of each of the 50 states and the District of Columbia. A Bond is a three party instrument by which one party (the surety) guarantees or promises a second party (the owner or general contractor) the successful performance of contract obligations owed to the second party by its principal (the contractor or subcontractor). A bond also serves as a prequalification device, because the surety effectively represents that it has examined the principal and found the principal qualified to complete the obligation or undertaking in question, and thus worth of the surety’s guarantee. Three kinds of bonds are common to construction: bid bonds, performance bonds, and payment bonds. Bid Bond guarantees that the bidder will enter into a contract for the bid amount. Performance Bond guarantees to the owner that a prime contractor will perform according to the contract referenced in the bond. Payment Bond assures the owner that the prime contractor will pay its subcontractors and suppliers, who might otherwise file liens against the owner’s property. Performance and payment bonds can be separate documents or may be combined. Just as lien laws vary, statutes governing public project bonds vary from state to state. This publication is designed as a summary of the basic requirements of state law, but it is not a comprehensive legal treatment of the statutes in the states. It does not contain legal advice. Because individual circumstances may vary widely, readers should consult their local attorneys for specific advice.
RIGHTS AVAILABLE: Mechanic’s and Materialman’s lien.
WHO MAY CLAIM: Anyone who furnishes labor or materials in the improvement of real property.
REQUIRED NOTICE AND TIMING: A hearing is required before filing a lien notice. Thus, a lawsuit must be filed and served on the owner before filing a lien. The lienor must file an application for a lien not later than 45 calendar days after the date of completion of the improvement against which it is filed. On the return date, not less than three nor more than ten days after service, if the amount of the lien is disputed, the court must hear and receive all admissible evidence offered and shall only permit the attachment of a lien in the net amount which the court determines is the reasonable probable outcome of any such dispute.
LIEN FILING: If an Order Directing Lien to Attach at is obtained, then the lienor must file a certified copy to preserve the lienor’s rights against subsequent encumbrances and purchasers.
SUIT FILING: If a suit to foreclose the lien is not commenced within three months after the Order Directing Lien To Attach at is entered, then the lien lapses, and the lienor’s rights are lost.
BOND FOR DISCHARGE: Any mechanic’s and materialman’s lien may be discharged at any time by a respondent depositing cash or filing a bond in the amount of twice the amount of the sum for which the claim for the lien is filed. The undertaking of cash or bond discharge must be conditioned on the payment of any sum for which the lienor may obtain judgment on the lienor’s claim.