Surety Bonds for Demolition Contractors

Before the federal government, a state government, or municipal entity demolishes an old building, careful planning is necessary in order to protect human health and the environment from hazardous materials within the structure. Hazardous materials include items such as asbestos, mercury, varnish, contaminated containers, treated wood, resins, adhesives, caulk, and lead-based paint.

Demolition contractors must follow federal or state regulations, and local municipal codes during the demolition process. This can include a pre-demolition inspection to identify hazardous materials and a plan for safe removal and disposal procedures.

Besides licensing, demolition contractors may also be required to obtain a payment and performance surety bonds for large contracted demolition projects. The surety bond requirement is determined by the owner of the project.

Demolition Surety Bonds

A demolition surety bond is a guarantee that a job will be completed according to a contract. A demolition contract may require both a payment and performance surety bond. The bond protects the owner of a project, and involves three parties:

1. The Obligee: A contract owner that requires a bond. In this case, it is typically the federal government, a state government or a municipal entity. Private companies may also require a surety bond as well.
2. The Principal: A contractor who is in charge of a demolition and named on the bond
3. The Surety: A surety company who issues the bond

If the contractor does not fulfill their contractual obligations, the surety may have to pay the contract owner or complete the work themselves. The surety will then seek reimbursement from the contractor for the loss.

Contract owners may have their own bond form which usually includes the demolition requirements, the amount of the bond (penal sum), the period of time the bond will cover, and bond enforcement. In instances where the project owner does not have a bond form, the surety can provide a generic bond form.

How Much Will This Bond Cost?

The premium that you pay for a Demolition Surety Bond will vary in cost and will be dependent on factors including the amount of the bond, the original amount of the contract, the bond language and personal and business financial statements.

Did You Know?

The Recourse Conservation and Recovery Act (RCRA) is a law that spells out the correct procedure for managing hazardous and non-hazardous solid waste. It also works to prevent pollution and increase recycling.