Real estate surety bonds are a category of surety bonds dealing with property. Surety bonds are used in real estate like bonds are used in other fields such as travel agencies, health club owners, and brokers. Today we are going to go over why realtors (and lawyers) need to know about surety bonds.
Surety bonds are used in a variety of situations ranging from criminal cases to basic business license requirements. They serve as a mode of protection should an appeal case be heard or a business opens for business. Each type of bond serves a specific purpose.
There are four main categories of surety bonds that we cover: defendant bonds, plaintiff bonds, license and permit bonds, and probate and fiduciary bonds.
While some real estate surety bonds may be for license requirements - it depends on your local state’s requirements - we are going to dive into two very typical real estate surety bonds: a lis pendens bond and a release of lien bond.
A common type of bond for real estate is the lis pendens bond. A lis pendens bond is a surety bond that blocks the sale of a property.
Imagine this scenario. A couple is divorcing and one party is trying to sell the family home without the other’s approval. A lis pendens can help compel the courts to halt the sale of the property.
Other scenarios where real estate may be wrapped up in a surety bond are when a lien is placed on a property or when taxes are owed on the property. Regardless of the reason, if a person needs to halt the sale of property they can file a lis pendens bond.
Securing a lis pendens bond is just part of the battle to block the sale of the property. A plaintiff still needs to prove to the court that the sale should legally be stopped permanently. A surety bond is an important card to play to show the court that this attempt to block the sale of property - and thereby the defendant’s incoming revenue - is not done wrongfully or illegally. Defendants can also file a release of lis pendens bond to counteract the lis pendens bond.
Another surety bond for real estate is a release of a lien bond. Liens are typically placed on a property over non-payment disputes. Liens are a legal recourse that can help people recover unpaid funds.
Construction companies, for example, can put a lien on a property if they do not receive payment for work completed or materials bought. Property liens can be detrimental as it ties up property in legal disputes. A release of a lien bond replaces the lien with a surety bond. Having a release of lien bond allows the parties to continue to resolve the issue but without tying up real estate property.
Real estate can be tied up in surety bonds that do not specifically mention property like a guardianship bond or curator bond. Since a guardian is in charge of an estate, a surety bond may be required to help protect the property against any mishandling of funds. It all depends on the type of estate, range of guardianship bonds, and current legal issues.
As you can see, there are a variety of scenarios where real estate may require a surety bond. Dealing with real estate surety bonds doesn’t have to be a hassle though. Contact Jurisco to learn about surety bonds for real estate in your state today.