When you own a large commercial corporation that requires a large premise, leasing is a great way of getting the space you need for a fraction of the price of buying. However, as lease terms tend to be longer, landlords might worry that companies might not either keep up with the payments or that they might become bankrupt before the end of the lease period. That’s where commercial lease surety bonds come in.
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Serving as a financial guarantee between the business and the landlord, it will typically include information regarding property maintenance, lease payment, if there are any fees for early termination of the lease, etc.
At Pinnacle Surety, we offer commercial lease surety bonds that are watertight. Using internal Surety Bond Underwriters, we will expedite the bonding process to ensure that our clients get a commercial lease surety bond that fits their requirements.
Who Needs Commercial Lease Surety Bonds?
Although they are not a requirement by every landlord, they are often needed in larger cities where rents tend to be higher or when a tenant is requesting to make costly and extensive improvements to the premises. A landlord will take risk management into consideration when determining whether or not a commercial lease surety bond is needed.
A commercial lease surety bond is issued in the name of the owner of the business who is leasing the premises, rather than the business itself.
How are Commercial Lease Surety Bonds Obtained?
There are three different sectors of each commercial lease surety bond – the obligee, the tenant and the surety carrier. In terms of a commercial lease, the landlord is the obligee, the business owner who is renting the space is the tenant and we are the surety.
The process begins by the obligee establishing what the required bond amount is, alongside how long the bond term will be. If the tenant violates any of the terms and conditions of the bond throughout their tenancy, that results in a significant financial loss to the obligee, the obligee can in turn file a claim against them up to the value of the full bond amount.
Commercial lease surety bonds are issued through our surety agents (known as producers at Pinnacle Surety). Our producer is typically appointed alongside a variety of surety bond carriers. With knowledge of the bond requirements, we will align the specific requests with the most suitable carrier.
How Much Do Commercial Lease Surety Bonds Cost?
The cost of the commercial lease surety bond will be dependent on several factors – including what the applicant’s personal credit score is, the principal’s assets, etc. As a surety bond carries a higher financial risk, the approval criteria for obtaining a commercial lease bond is far more demanding.
What Other types of surety bonds Do We Offer?
Pinnacle Surety also offers bid bonds. Bid bonds are suitable for project owners and contractors who are looking to start a contract bidding process. If you want to bid on a job, a bid bond will guarantee that the bidder will follow through and agree to a contract once they are given the project in question. A bid bond also has the benefit of guaranteeing that the contractor will have full access to sufficient funds needed for the project. This type of bond is ideal for a large company looking for new premises and is a safety net that guarantees that the contractors in question will take on the project and see it through until completion.
A payment bond is crucial for those who are working within the contracting and construction industry. Forming a three-way agreement between the contractor, owner and surety, it acts as a guarantee so that that the suppliers, subcontractors and employees are protected against non-payment. All three parties will have to agree to the terms laid out by the contract, to ensure that the contractors are paid upon completion of the project. For extra protection, alongside a payment bond, we can offer a subcontractor payment bond which will act as extra protection for the contractor.
We also offer performance bonds, which act as an additional protective layer to ensure that a project will be completed under the set terms and conditions. If there are any defaults throughout the project, no matter what the circumstance, the surety bond company has the ability to open the unfinished work up to a bid or complete the rest of the work themselves. Protecting the contract owner, although it is not an instant payout for any losses that they have accrued from the default (which will come from insurance), it will still cover them in the long-term allowing the work to be completed.
Payment Bond Vs. Performance Bond
Often these two types of bonds are confused as they are both vital to the completion of a project. However, they do differ from one another. A performance bond will, as mentioned above, ensure that a contract owner is covered and protected if a default occurs in the project. A payment bond, however, is a guarantee between the contractor and the employees and suppliers that they will get paid upon completion of the project.
An supersedeas bond also known as an appeal bond, is vital in the situation of a court case. Instead of appealing to the court (which will cost the defendant a significant amount of money), they can invest in an appeal bond. Protecting the defendant in case of a loss, it will be paid to the third party or court in order to demonstrate an intent to commit to the final ruling. This type of bond also has the benefit of protecting the court in case of any dishonest activities or unnecessary appeals throughout the proceedings.
Surety Bond Vs. Insurance
It’s important to know the difference between a surety bond and insurance. A surety bond will transfer all of the financial risk to a third party, not providing protection for the person who is purchasing the bond. Underwritten with no expectation for a loss, if a loss is incurred by the bonding company a repayment by the principle is then expected.
Get in Contact with Pinnacle Surety Today
Do you want to find out more about our commercial lease surety bonds and how they can benefit your company? Get in contact with us today and we can guide you through the process. With over 20 years of experience in the industry, we have a team of highly trained, experienced and knowledgeable staff on hand to help.