If you’re a contractor or project owner seeking clarity on maintenance bonds, including coverage requirements, costs, and key differentiators from warranty and performance bonds, you’ve come to the right place.
In this blog post, we’ll explore all aspects of maintenance bonds, providing valuable insights and helping you navigate the world of surety bonds. Let’s get started!
What is a maintenance bond?
A maintenance bond is a construction bond guaranteeing that a contractor will fix any workmanship problems that arise after a project is finished. The project owner typically requires the bond as protection from financial losses for a specified period. It safeguards against potential shortcomings in workmanship, ensuring the contractor remains accountable for their obligations after project completion.
This bond sometimes goes by other names, such as warranty bond or guarantee bond.
What does a maintenance bond cover?
A maintenance bond covers the cost of necessary repairs, replacements, or corrections of defects that may arise during the defined maintenance period. It typically includes the contractor’s responsibility to address flaws resulting from poor workmanship or other deficiencies. Warranty on materials aren’t typically covered under this bond.
This bond offers peace of mind to project owners by minimizing financial risks associated with unforeseen repairs during the specified maintenance timeframe.
Maintenance Bond Requirements
Maintenance bonds are required for many state and federal construction projects. The requirements for the bond can vary depending on the project and the surety company. However, most will require the contractor to:
- Maintain the project following the terms of the contract.
- Make all necessary repairs to the project within a reasonable timeframe.
- Notify the project owner of any defects in the project as soon as they’re discovered.
- Keep all records related to the maintenance of the project.
How much does this contract bond cost?
The cost of a maintenance bond depends on several factors:
- Size of the project
- Type of project
- The contractor’s credit score and financial situation
- The surety company
Before you can purchase this bond, a surety company will run your credit and look at your financial statements to ensure you can reimburse them if they settle a claim for you. A maintenance bond typically adds additional costs to your performance bond. The first year will be free, and every year after that will be an additional cost of 0.1-0.3% of the contract amount.
What happens if a contractor fails to meet their obligations?
If a contractor fails to meet their obligations under a maintenance bond, the project owner can file a claim against the bond. The surety company will pay the project owner for any losses incurred – up to the total bond amount. The surety company will then recover the money from the contractor. This process ensures the project owner isn’t left with unexpected expenses resulting from the contractor’s non-compliance.
Other Frequently Asked Questions
What is an example of a maintenance bond?
An example would be a bond that a school district requires to ensure that a contractor properly maintains a new school building for a two-year period after it’s built. If the school encounters a problem, such as leaking pipes or electrical malfunctions, and the contractor fails to make any necessary repairs to the building during the five years, the school could file a claim on the bond for the cost of the repairs.
What is the difference between a warranty and maintenance bond?
While “warranty bond” and “maintenance bond” are often used interchangeably, they can have different interpretations depending on the context.
- Generally, a warranty bond implies a broader coverage that extends beyond maintenance, including protection against defects, malfunctions, or performance issues.
- A maintenance bond focuses explicitly on repairing and correcting defects that occur during the designated maintenance period.
How do maintenance and performance bonds differ?
Performance and maintenance bonds are commonly confused, but they’re required for different phases of the construction process. Both protect project owners from poor workmanship. You can get both of these bonds, along with a payment bond, at the same time – giving your partners peace of mind during and after the building process.
Here are the key differences between and maintenance bond and a performance bond:
- A performance bond is a type of surety bond that guarantees that a contractor will complete a project according to the terms of the contract.
- A maintenance bond guarantees that a contractor will maintain a project for a specified period after completion.
How to Apply for a Maintenance Bond
As a contractor or project owner, understanding the role and benefits of maintenance bonds is crucial for fostering trust, managing risks, and safeguarding investments. If you have any questions about maintenance or other construction bonds, don’t hesitate to contact us! We’d be happy to talk with you and clear up any confusion.
If you’re ready to apply for this bond, you can use our simple online application or call us at 888-435-4191 to apply over the phone. ZipBonds offers the fastest and most secure option for getting the surety bonds you need.