Payment Bond Versus Mechanics Lien: How To Get Paid (2026)

What a Mechanics Lien Secures

A mechanics lien is a security interest in the property where the construction work occurred. What happens when a mechanics lien is filed? If the owner sells the property, the lien ensures the lienholder is in line to be paid from the sales proceeds. Additionally, the lienholder can file a foreclosure lawsuit to force a property sale.

What a Payment Bond Claim Secures

A payment bond is a contract between three parties: the obligee, the principal and the surety. The obligee is the property owner who requires the payment bond. The principal is the general contractor on the project. They acquire the bond to protect subcontractors, material suppliers and equipment lessors.

The surety is the company that issues the bond and pays claimants if the principal fails to pay them.

Private vs. Public Project Rules

Private construction typically relies on mechanics liens to protect laborers and suppliers. The property owner accepts the risk of nonpayment.

In public construction, the federal government pushes the risk of nonpayment onto the contractor by requiring a payment bond. Generally, any federal construction project over $100,000 calls for a payment bond under the Miller Act.

Most states have “Little Miller Acts.” Minnesota, for instance, requires a payment bond for all construction over $175,000.

Who Can Use Each Remedy?

Claimants for both mechanics liens and payment bonds normally include the following:

• Subcontractors
• Material suppliers
• Equipment lessors
• Laborers

One of the primary differences between a payment bond versus mechanics lien is that general contractors can file mechanics liens, but are usually ineligible for claims against a performance bond.

Notice and Filing Differences

In general, claims against a payment bond are easier to file than a mechanics lien. Most payment bonds have limited notice requirements. Often, the party must notify the contractor and file a claim. If the surety determines that the claim is valid, it pays the unpaid bill.

In contrast, the steps for how to file a mechanics lien are complicated. Mechanics liens tend to have several notice requirements, including preliminary notices, recording notices and notices of enforcement.

Deadlines for Liens and Bond Claims

A major difference between a payment bond versus mechanics lien is the deadlines. Mechanics liens usually have several deadlines to notify the owner, record the lien and file an enforcement action. Bond claims may only have one deadline imposed by the state’s statute of limitations to seek payment of unpaid obligations.

Exceptions Every Contractor Should Know

Payment bonds have exceptions for certain types of projects. For example, some states exempt road construction from payment bond requirements. They also have exceptions for certain parties, such as suppliers to suppliers.

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