Private Work

[Bond Magician]

Why won't a Surety company approve work that is being done for a homeowner (private job)?

[Surety Queen]

Originally Posted by Bond Magician

Why won't a Surety company approve work that is being done for a homeowner (private job)?

Good question. The purpose of a bond is to protect public money - as in taxpayers. Not for their private work - but for public work. The bond is to make sure that if a contractor starts a job for a municipality and decides not to finish, that the Surety will come in to complete the job. It is suggested that a homeowner have a written contract with the contractor and that they check references thoroughly.

[bondman]

Originally Posted by Surety Queen

Good question. The purpose of a bond is to protect public money - as in taxpayers. Not for their private work - but for public work. The bond is to make sure that if a contractor starts a job for a municipality and decides not to finish, that the Surety will come in to complete the job. It is suggested that a homeowner have a written contract with the contractor and that they check references thoroughly.

The purpose of a bond is protect the Employer, whoever that may be. Bonds can and are issued in favour of both Public and Private employers. Specifically the Miller Act and the principle of 100% Performance and Payment Bonds was introduced to protect public interest but that has never meant that Suretys cannot issue bonds to other parties.

[Surety Queen]

Originally Posted by bondman

The purpose of a bond is protect the Employer, whoever that may be. Bonds can and are issued in favour of both Public and Private employers. Specifically the Miller Act and the principle of 100% Performance and Payment Bonds was introduced to protect public interest but that has never meant that Suretys cannot issue bonds to other parties.

OK - makes sense. But why then can't homeowners require contractors to provide bonds for their private work? Are their specialty markets out there who will?

[bondman]

I guess its all down to the sophistication of the homeowner, formal contract conditions, costs and the ability of the contractor to provide a bond. In addition to the cost of the bond being passed on to the homeowner, in the event they want to claim, they have to spend extra on substantiating their claim.

[Admin]

Originally Posted by bondman

I guess its all down to the sophistication of the homeowner, formal contract conditions, costs and the ability of the contractor to provide a bond. In addition to the cost of the bond being passed on to the homeowner, in the event they want to claim, they have to spend extra on substantiating their claim.

In addition, it is a lot easier for a bonding company to deal with a public obligee, as they don't need to explain how bonding works (at least they shouldn't have to).

There are numerous reasons why private bonding with homeowners as the obligee is not attractive to surety.

Keep in mind, most sureties are glad to guarantee private bonded work for large companies like Walmart.