When it comes to home remodeling or renovation process going on in few portions of your home, normally the first time a homeowner becomes well-known with the term “surety bond” is when problems with the contractor have come up.
It’s also a time when the homeowner may find that the general contractor has no liability insurance and now it’s the only the surety bond to look for help in recovering damages such as shoddy workmanship or desertion of the project. Unfortunately, the news is not good for this process. Moreover, the point that should be considered is a surety bond is not an insurance policy but rather an assurance whereby the surety guarantees that the contractor will carry out the obligation that is stated in the bond. There are a number of bond types present but for the rationale of home remodeling as well as improvements and there are three bonds that would be useful for applying are Contractor Licensing Bonds, Performance Bonds and Payment Bonds.
At first, address both the Payment and Performance bonds, as they are the least exploited by homeowners in their home improvement projects usually and carry out a little more protection for homeowners. Generally, Performance Bonds warranty the completion of the project as per the building plans and specifications as well. If the job is abandoned or the work is offensive, the bonding company has the alternative of hiring another contractor to complete the work or settling for damages. Payment Bonds assures the owner that there is no liens for labor will be filed against the property as payment is guaranteed. In both cases the homeowner pays a percentage of the contract price for acquiring the surety bond and it becomes the obligee of the surety. There are numerous complexities to all these bonds and are not covered here that you would want to know if considering either of these bonds.
The most common surety bond homeowners who get implicated with this process is the Contractor License Bond, typically as a result of the contractor breaching some aspects of the Contractors License Laws. The work of contractors are to post some form of security deposit obligatory with the Contractors State License Board and surety bonds are also used for this purpose typically though cash or certificate of deposits may get posted in California. Moreover, the amount of the surety bond for general contractors in California is $10,000. That’s 10K for all the jobs the contractor has undergoing, and not per project. Very often damages per project go above the whole number of dollar amount of the bond; let it become available to the multitudes on your own.
So once that bond gets depleted, the contractor should renew the particular bond as well as pays back the money lost to the surety in order to keep his or her license. And if a complaint has been filed with the Contractors’ State License Board, an independent investigation will be conducted by the Board or regulatory agency in addition to the surety company for determining if any violations occurred. Based upon the violations, the contractor may quote and there is a possibility of losing his/her license. However, it’s not a speedy process by any means and can be annoying to the harmed homeowners who are not well-known with the process but needing to get on with repairs.
By John Benson