Lesron Insurance Provides Bonds for Construction Projects
As an independent contractor or the owner of a construction company, you are often required to obtain payment bonds to ensure the partners you work with are paid according to your agreement. Doing so makes you a more trustworthy business partner and allows you to fulfill the legal requirements set by the government. Lesron Insurance can provide you with payment bonds for your Fullerton, CA projects, helping you successfully complete your construction obligations. Please reach out to us if you have any questions or would like to obtain a bond for your project.
What Is a Payment Bond?
A payment bond is a type of surety bond used to ensure that your subcontractors and materials suppliers are paid according to your project contract. It gives peace of mind to your outside partners that they will receive compensation for the work or materials they provided upon the completion of the project, making you a more reliable company to do business with. A payment bond is essential for jobs on public property where security interests cannot be used. Our team will help you obtain the bonds you need to ensure your project is a success and follows all legal requirements.
What Is the Purpose of a Payment Bond?
The purpose of a payment bond is to work hand-in-hand with a performance bond to ensure all parties uphold their end of the agreement. The two bonds work together to add an extra layer of trust and support in business dealings involving contract work. The performance bond secures the subcontractors’ promise to complete the work in accordance with the contract, at the agreed upon price, and within a certain allotment of time. The payment bond works to secure the other side of the deal, protecting certain laborers, materials suppliers, and subcontractors against nonpayment from the contractor in charge of the project. Together, they make a business deal more sound, so everyone can feel comfortable in doing their part.
When Is a Payment Bond Necessary?
Payment bonds are necessary for many construction projects, especially those projects completed on public ground. As the contractor in charge of the project, you purchase payment bonds when negotiating a construction contract to ensure those you will be working with that they will be paid for their work on time and in the appropriate amount. In most cases, payment bonds are required by law for construction projects on public land. This law exists because mechanic’s liens cannot be placed against public property. A payment bond is often the only protection subcontractors and material suppliers have if the main contractor doesn’t pay for the goods or services they provide for the project.
Payment Bonds Are Required for Many Public Projects
Payment and performance bonds are required for nearly all public projects in Fullerton, CA. The federal Miller Act requires all general contractors who are completing federal construction projects to post these bonds, and this law extends to the state of California and any public projects completed here. Payment and performance bonds are required for contractors to guarantee the completion of their contractual duties and the payment of their subcontractors and material suppliers. This law was put in place to help make projects involving public land go smoothly, ensuring all parties involved uphold their part of the contract.
Why the Bond System Is Important
The use of construction surety bonds, like payment and performance bonds, was widely adopted for government and public projects nationwide. Though the Miller Act made this practice the law for federal projects, individual states have adopted similar rules to govern their public projects. The use of these bonds provides many benefits to all parties involved. Some of these benefits include:
- Prequalifies Contractors: Without the use of bonds, any contractor could come to the government with a bid to complete the project, and the government would have to use their own judgment to determine who would be the best candidate. Requiring the use of surety bonds prequalifies contractors, ensuring they have gone through a reputable surety company that believes the contractor can complete the job as they say. Surety companies will not allow the sale of bonds to contractors they do not believe can perform the job duties.
- Protects the Government & Taxpayers: When bonds are not used for public projects, it leaves the entire project up to chance. If the contractor does not perform as promised, it costs the taxpayers money for a public project that was never completed. However, when bonds are used, the surety company will pay if the contractor does not complete the project.
- Holds Everyone Accountable: Construction bonds hold everyone in the deal accountable. Subcontractors are required to complete the work they said they would, and contractors are required to pay them as set out in the contract. When everyone is held accountable, the entire project is more successful.
Contact Lesron Insurance for Your Surety Bond Needs
If you are a contractor preparing a bid for a project, you will likely need a surety bond to secure subcontractors and materials suppliers to work with you to complete the job. Lesron Insurance specializes in providing bonds for contractors and real estate developers. Founded in 1985, we have many years of experience and can help you obtain the bonds you need to make your project a success. Reach out to us today for more information.