The construction industry has some of the strictest laws when it comes to surety bonds. There are bonds for every step of the process. These can be for anything from approving final construction plans to earning the right to bid on a project.
Surety bonds provide protection for a number of parties. These can include the project developer who is financing the project or the general public who will use the facilities once completed. Construction surety bonds are a way to give one more line of defense against all of the problems that can arise in a construction zone.
Some of the most common surety bonds that are required in a construction project include:
California Performance and Payment Bonds
A performance and Payment Bond is used in the event that a contractor fails to complete the job as outlined in the contract between the construction professional and the project developer. The surety bond then helps cover the cost of bringing in a new contractor to complete or fix the work left by the bonded contractor. Almost all government-funded projects require a Performance and Payment Bond. Most contracts that require a Performance Bond will also require some sort of BID BOND.
California Stop Notice Release Bond
A California Stop Notice Release Bond states that the claimant receives judgement in any action brought on said claim. The bond holder must pay the claimant in an amount no greater than the sum specified in the contract. The bond amount must be equal to 125% of the claim stated in the stop payment notice.
Encroachment Permit Bond
Some cities, like the City of West Sacremento, require an Encroachment Permit Bond. These bonds are required when work extends beyond a building and interferes with public property or public utilities. This could include a curb, a sidewalk, public plumbing, and more. The amount of the bond varies from city to city, but most require an amount equal to 100% of the value of the work performed within the city right of way. The bond acts as a safeguard for the city against any financial or physical harm caused by the bonded construction professional.This includes making sure the construction professional follows any and all local regulations and laws dictating how certain utilities and infrastructure are handled.
Subcontractor Surety Bond – Performance Bond
In some cases, a subcontractor may also be required to file for a performance bond. They help protect the construction professional who hired the subcontractor from any misdoings or desertions. Subcontractors rarely need to get a BID BOND in conjunction with a performance bond.