A Payment Bond assures that the contractor will pay subcontractors and material suppliers on state/federal public works and large commercial or residential jobs. In the event that the general contractor fails to fulfill its obligations, the bond will be used to pay the suppliers, subcontractors, and ultimately finish the project.
The payment bond is issued to the general contractor by a surety company. This surety company acts as a layer of protection for both the party funding the project along with the subcontractors and suppliers contributing to the job. If the general contractor fails to pay any subcontractor or supplier, the surety company will step in and complete the funding. According to the Surety Association of America, surety companies pay BILLIONS of dollars due to contractor failure on bonded projects each year.
Similar to mechanics liens; if a contractor must make a claim on the payment bond, there are certain criteria that need to be met. A potential claimant must send a timely preliminary notice (in accordance with their state’s statutes). Additionally, a claim on a payment bond must be made within 75 days of completion of the project. However, if a notice of completion is filed, the claim must be made within 15 days after recordation of a notice of completion.
To begin the bond claim process, contact CNS today!