Condemnation Bond

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What is a condemnation bond?

If the government condemns land or property, the owner should receive fair market value for it. Even if the government only takes a fraction of the property for public use, the owner should receive compensation for any decrease in market value to the rest of their property. 

To ensure that a property owner receives fair compensation for condemned property, the court may require the company taking possession to post a condemnation bond. This bond works differently than many other types of bonds because the company condemning the land must pay the property owner the price set by the court. This is known as an absolute financial guarantee.

Get Your Condemnation Bond:

Quick Takeaways

  • Condemnation is when private property is taken or acquired legally for a public purpose. 
  • To ensure a property owner receives fair compensation for their condemned property, the court may require the company taking possession to post a condemnation bond. 
  • The company condemning the land must pay the property owner the price set by the court.
  • It’s essential to obtain this bond as quickly as possible if you want to move forward with your project as planned.

Who needs a condemnation bond?

You’ll know you need a condemnation bond if the court orders you to get one. Obtain this bond as quickly as possible to move forward with your project as planned. 

Common examples of projects that may require this bond include:

  • Public utilities
  • Roadwork or construction
  • Railroads
  • Private projects that serve the public good
  • Powerlines and pipelines

How do condemnation surety bonds work?

This court bond is a three-party agreement between a principal, an obligee, and a surety.

  • Principal: The party that must obtain the bond (i.e., the company purchasing the property)
  • Obligee: The property owner and beneficiary of the bond
  • Surety: The company that issues the bond to the principal and investigates claims if they arise

The court will decide how much the contested property is worth (its fair market value), and the principal must pay that amount. If they refuse, the obligee may file a claim against the bond. If the principal still refuses to pay the obligee, the surety will collect payment from them – plus interest and fees. In short, a condemnation bond ensures payment of the condemned property.

Condemnation Bond Example

Let’s say you work for a powerline company that needs to run lines through a private landowner’s property. You and the owner can’t agree on a fair price for using the land, so the court gets involved.

The judge decides on a fair price and orders you to obtain a condemnation bond to ensure payment. If you – the bonded party – pay the landowner what you owe them, you won’t face bond claims.

Frequently Asked Questions

Condemnation is when private property is taken or acquired legally for a public purpose. The right or power of the government to condemn personal property is called eminent domain. Federal, state, and local governments (even private entities in some cases) have the power to condemn private land for public use.

Owners may challenge the condemnation or accept the terms proposed and receive fair market value for their property. If the court must intervene to settle a dispute, they may require the party condemning the property to become bonded to ensure a fair price for the owner. This bond may be necessary to prevent project delays.

Condemnation bond pricing varies by state and project. The court will set your bond requirement, and you will pay a small percentage of the specified amount as your premium. The higher your credit score, the lower your premium rate will be.

As a rule of thumb, the bond amount will equal the difference between the price you (the company condemning the property) offer to pay and the price the previous owner asks. You may also need to put up collateral to obtain your surety bond.

How to Apply for Your Condemnation Bond

To complete our condemnation bond application, you must provide financial information and a copy of your court order. You can apply online or call us at (888) 435-4191. One of our agents would be happy to walk you through the bonding process over the phone. Our goal is to get you bonded in a zip!

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About ZipBonds.com

Founders Ryan Swalve and Zach Mefferd formed the vision for ZipBonds.com when they realized how overly complicated it was to help clients place surety. The frustration of being unable to incorporate the technology they’d used in other insurance-focused projects left them thinking “there has to be a better way.”

Fast forward a couple of years, and that better way is the impetus of everything we do at ZipBonds. We constantly look for innovative ways to improve the bonding process for our clients and agents. Our team comprises individuals who understand all angles of surety – for companies, agencies, and individuals. Incorporating everyone’s point of view to improve the process while simultaneously integrating cutting-edge technology is what sets our business apart.