New York Lien Law § 37: Understanding a Bond to Discharge All Liens

Reviewed September 7, 2026.

A bond under Lien Law § 37 can move qualifying construction claims from real property to bond security. It is a distinct statutory procedure, with requirements for both the party obtaining the bond and the contractors or suppliers seeking payment.

The bond is tied to a particular contract

An owner or contractor may act as principal before or after the improvement begins. The bond identifies the owner, contractor, surety, property and underlying contract. A court fixes its amount, which cannot be less than the amount then unpaid under that contract. The surety must meet the statute’s authorization and solvency requirements.

Court approval, filing with the proper county clerk and a discharge order are required. Coverage concerns work and materials under the contract described in the bond. A development with multiple contracts may require more than one bond. Existing liens require separate analysis; do not assume filing a § 37 bond retroactively eliminates every recorded lien or changes every claimant’s existing rights.

Claimants must perfect their bond claims

A covered claimant must file a verified notice of claim with the county clerk where the bond is filed within the applicable period for filing a mechanic’s lien. The notice identifies the claimant and relevant entities, owner, contractor, surety, hiring party, work or materials, agreed price or value, unpaid amount and property. Review the statute’s precise requirements and the court order before using an ordinary lien form.

Obtaining a copy of the bond promptly helps a claimant identify the correct security and docket. Filing a property lien alone should not be assumed to perfect a claim under § 37. The statute provides a procedure to discharge a later property lien upon proof that the approved bond secures the claim.

Enforcement has its own filing, party and timing rules

Section 37(7) requires filing the summons and complaint in the county where the bond is filed before commencing the action, and joining the principal, surety, contractor and prior notice-of-claim filers. Later claimants may be joined under the statutory amendment procedure.

The action generally must begin within one year after completion of the improvement, or, if the work is abandoned, within two years after the claimant’s last work or materials. These are different from the ordinary one-year lien-duration calculation. Calendar the notice and suit requirements separately.

Evaluate the practical consequences

The principal should understand premiums, collateral and indemnity obligations. Claimants must still prove entitlement to payment and respond to valid defenses. A § 37 bond offers security; it neither pays the invoice nor settles the underlying dispute. Counsel should coordinate the court application, existing liens, lender requirements and claimant notices.

Kushnick Pallaci PLLC assists clients throughout New York with surety and construction bond litigation. Contact 631-752-7100 or vtp@kushnicklaw.com.

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