Utilities Bond

[grasshopper]

I am a landlord who is having a difficulty with some of my current tenants paying their utilities. Another landlord suggested that I purchase a utilities bond but every where I go I m told that few companies write them. What exactly is a utilities bond and why are they so difficult to get?

[marietta68]

Originally Posted by grasshopper

I am a landlord who is having a difficulty with some of my current tenants paying their utilities. Another landlord suggested that I purchase a utilities bond but every where I go I m told that few companies write them. What exactly is a utilities bond and why are they so difficult to get?

Utility bonds guarantee the account holder (in this case, the landlord) will pay promptly for service provided. It's a pure financial guarantee and is considered a bond of convenience. The most common objection to this category of bonds is that the utility company rarely notifies the bond company of any slow/non payment problems until the full amount of the bond (which is a substitution for a cash deposit) is exhausted - thus translating to a total loss on the bond. Almost every utility company will accept alternatives to surety bonds: cash, letter of credit, and so on. Consequently, the customer who wants a bond usually cannot provide any of those alternatives, making underwriting a challenge. The suggestion made by your acquaintance would not address the problem of nonpayment by your tenants, anyway. If each of your units isn't metered separately, you may need to consider raising the amount of tenant deposits.

[Admin]

The other problem with utility bonds is that they are usually required due to poor credit or weak finaicial statements. Two items that scare away most bonding companies.

Our agency only recently began to write utility bonds again, as it is difficult to find markets willing to write them.