What is a Maintenance Bond?
Maintenance bonds are a type of construction bond that provide for the upkeep of a project for a specified period of time after the project is completed.
These bonds guarantee the quality of a contractor’s work, and that they have performed their work in accordance with state regulations, building codes and construction standards. Maintenance bonds protect obligees against defective workmanship or materials, and are also referred to as “warranty bonds”.
Maintenance bonds are often required on state and public construction projects. They are sometimes requested by private construction owners, though less often.
Hence, they work like an agreement between the principal (the contractor), the obligee requesting the bond (the private or public construction owner) and the surety bond company that issues and backs the bond financially.
If a contractor’s workmanship on a certain project is not satisfactory, either in terms of craftsmanship or materials, the obligees can file a claim against the maintenance bond, during the so-called ‘maintenance term’. If the claim is proven, the surety has to financially compensate the obligees for damages and losses due to these issues.
A contractor who has had a claim filed against their bond must the indemnify the surety for any compensations it has made to obligees. This, too, is part of the surety bond agreement. It is therefore always best to avoid possibilities of claims.
Questions about Contract Bonds/maintenance Bonds
Who needs to obtain a maintenance bond?
Maintenance bonds (or warranty bonds) are needed by contractors who have performed work on a certain construction project.
They are almost always required on public construction projects, while on private projects they may sometimes be required at the discretion of the project owner.
Are there different types of maintenance bonds?
There are no different types of maintenance bonds.
There are differences between all such bonds, however, since every bond concerns a particular construction project, and the bond’s conditions, bonding amount and maintenance term are in conformity with the specifics of that particular project. Maintenance terms are typically set for a period of 12, 18 or 24 months.
How much does a maintenance bond cost?
Maintenance bond cost is a percentage of the total amount of the bond. When considering what percentage, or premium, to offer to the principal, sureties consider a variety of financial and non-financial factors. The most important among these factors is personal credit score. The higher an applicant’s score, the lower their rate usually is.
In the case of maintenance bonds in particular, sureties will also want to know the amount of the initial contract for the construction project. They may also want to see a principal’s financial statements, and receive more information about their experience and their work records.
Typically, if an applicant has a high credit score, they can expect their bond to cost between 1%-4% of the total bond amount. For a $30,000 maintenance bond, for example, principals can expect a premium between $300 and $1,200.
The surety which issues the bond is also an important determining factor of the cost of your bond. Lance Surety Bonds works with a number of acclaimed and highly professional sureties. All of them are A-rated and T-listed, which means that any bond issued by them is among the best bonds available in the country.
Furthermore, some applicants may be able to reduce costs by obtaining their maintenance bond and performance bond together, due to any performance-related risks being spread more evenly between these bonds.
Can I get a maintenance bond with bad credit?
As with other contract bonds, maintenance bonds are usually not issued for applicants with bad credit. There may be exceptions to this rule in cases of contractors experiencing only mild difficulties with their credit score.
For further information you can always contact our surety bond experts at (877)-514-5146 and inquire about the particular conditions of getting a maintenance bond with lower credit. Our experts will be happy to respond to your queries.
How to get your maintenance bond
To get your bond, apply online through our easy-to-use application tool, and submit your form. Approvals for maintenance bonds are fairly fast so you can expect to hear from us soon. Once we have processed your application, we will provide you with your free bond quote.
If you need any help or guidance, or have any questions, do not hesitate to call us at (877)-514-5146. We are here to provide you with assistance and additional information.
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