A Payment Bond does just what it says. It guarantees payments to those involved in a construction project whether they are laborers, subcontractors, or suppliers. A Payment Bond is typically issued in conjunction with a Performance Bond. They are almost always request together as a Performance and Payment Bond. Together these two bonds help to guarantee that the owner, suppliers, or subs will not be adversely affected in the event that a contractor defaults.
Payment Bonds provide a way for you to ensure that the terms of a contract will be enforced. They provide peace of mind for not only the contractor, but also, for example, to a homeowner who would like the reassurance that their job in going to be completed on time and in accordance to their construction contract.
Payment Bonds are particularly significant for jobs on public property since Mechanic's liens cannot be placed on public property as they can be on private property. A Mechanic's lien provides the assurance that outstanding debts will be paid when the property is sold. The Payment Bond provides the security that payments will be made to contractors or subcontractors who are working on public property. If the project is in excess of $100,000 on private property it may also require a Payment Bond. Bonding Solutions can help you to determine your specific needs in this area.
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