How could a surety bond protect my interests as an owner?

On Behalf of | Dec 2, 2021 | Construction Law |

Landowners and general contractors who are undergoing a construction project in the greater Miami and Fort Lauderdale area will want to evaluate their options carefully to be sure that their investment is protected.

After all, these enterprises have to count on other companies, either their general contractor or several subcontractors, to do the work and do the work right.

If these firms do defective construction work, or just do not finish performing their contract at all, an owner can be left without a return on their investment and with significant legal liability to boot.

Likewise, if a contractor or subcontractor does not pay their staff, their suppliers, and others, these third parties may look to the project owner or general contractor for payment. This scenario can mean that effectively, a business has to pay twice for the same work.

This is why general contractors, or project owners, go out of their way to take legal and business steps to be sure that those who agree to do work on a construction project actually do it and do it timely and correctly.

Contract surety bonds provide an additional layer of protection to businesses

One step a business can take is to require a contractor or subcontractor to secure what is called a contract surety bond.

Basically, a contract surety bond is a financial institution or insurance company’s promise to make an owner or general contractor whole if the business which purchased the bond does not do work as promised.

A contract surety bond can also protect a business from double payment should a contractor or subcontractor not pay its bills.

The bond also can serve as a backstop should, after a project is complete, serious construction defects get discovered and the contractor or subcontractor is unwilling or unable to fix them.

Usually, bonds have maximum limits of liability and other conditions.

As an important business contract, the firm wanting a surety bond should pay careful attention to drafting or negotiating the document to be sure it is clear and conforms to Florida law. If something does go wrong, legal intervention may be necessary in order to file a claim against the bond.