Contractors and developers are likely to require construction permit bonds for development and improvement projects on city or county property. Construction permit bonds are site development bonds that are tightly linked with the issue of a construction permit. The obtention of the bond is necessary to secure the construction permit.

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Pinnacle Surety has over 25 years of experience as a contract bonds agency in the construction industry. So, we are confident we can help your business prosper and grow even when you’ve failed to secure bonds before. We are committed to your success. That’s why we ensure we get to know you and your project to provide the service you need. But first, let’s explain how construction permit bonds work.

Construction permit bonds: Another type of performance bonds

Construction Permit bondsA municipality can require licensed developers and contractors to provide a permit bond before granting the construction permit. The process is designed to protect the city or county’s financial interests.

The permit bond acts as a legally binding agreement between the municipality, the contractor, and the surety bond company. As a result, you might hear of permit bonds under the terms contract surety bonds, a construction completion bond, surety bond construction, municipality improvement bonds, subdivision improvement bonds, land development bonds, or performance bonds. From the municipality’s perspective, requesting this type of performance bond is legal protection designed to ensure that the responsibility of the project delivery falls onto the contractor:

  • The completion of the necessary improvement works within the agreed time frame.
  • The improvements financing.
  • The improvement of maintenance against defective materials and workmanship for a year or more after the completion.

Contract bonds are a legal requirement for public projects acting as a guarantee against the failure to complete the project. Additionally, they can also include additional surety bonds to reflect the contractor’s responsibility, such as subcontractor bonds if your business employs subcontractors, for instance.

When do you need to have completion bonds for construction?

As not all municipalities require a permit bond, it is typically something individual municipalities will advise on when the property owner tries to obtain a construction permit. As such, the bond provides a form of insurance to the government agency, which is why it is usually issued by a bank or an insurance company as part of development indemnity coverage insurance.

Performance bonds are typically seen in the public sector for contracts of $100,000 and over. They can also be required for private sectors when they need to rely on general contractors for their business operations. They are frequently used in real estate development and construction projects.

Are performance bonds all I need for the public sector?

Construction CPermit bondsNot necessarily. As contract bonds focus not only on the work delivery but also its financing, performance bonds in the public sector go hand-in-hand with payment bonds. Payment bonds refer to the responsibility of the contractor to fully finance:

  • Subcontractors
  • Workers
  • Suppliers

Payment bonds add protection for all parties involved in the project, ensuring:

  • The municipality doesn’t have anything to pay after completion.
  • The subcontractors and laborers’ wages are guaranteed.
  • The contractor manages all financial liabilities.

Payment bonds can also appear as labor and material bonds in private projects too.

It may also be a good idea for property owners to consider investing in additional bonds in order to win public projects. Indeed, government projects can be notoriously difficult to secure, which is why you can use additional surety bonds to impress a client:

Types of construction permit bonds

There is more than one type of construction permit bond depending on the work that needs to be completed. You may be required to obtain:

  • An encroachment bond for work that encroaches on land owned by the government, including highways and public roads.
  • A right of way bond for work on public right of ways, such as sidewalks.
  • A grading bond for earth-based work such as drainage, erosion control, or excavation.

Acquiring the right site development bonds and construction bonds can be difficult. At Pinnacle Surety, we are passionate about supporting business owners and contractors in the construction sector with tailored contract bond advice. As a dedicated surety bond agency, we bring you closer to surety companies.

Why choose Pinnacle Surety for your subdivision surety bond

We have over 25 years of providing surety solutions. So, you can rest assured that our team of experts is here to provide guidance and support in securing surety bonds. We value our clients and enjoy building long-term relationships to support their business growth over time. We also have a close working relationship with surety companies all around the country.

Win new public projects and secure your performance bonds with Pinnacle Surety. Call (844) 612-7238 to get started!