Here is a perplexing situation. How would you handle this bond request?
The client is planning to modify ($$$) a building they are leasing. The landlord wants a security deposit equal to the value of the construction work – to assure that it is completed.
Since this will unduly tie up the client’s money, the agent is asking for a surety bond to protect the landlord.
- What kind of bond would that be?
- Who is the applicant / Principal?
- Can a Performance Bond be issued for the landlord if they are not party to a contract?
The FIA Surety Solution:
- There is no bond specifically for this siuation. We could call it a “Leasehold Improvement Indemnity Bond.” I just invented that!
- The only contract involved, that could be the subject of a Performance & Payment bond, is between the lessor / client and their builder.
- If such a bond is issued, the builder would be the applicant, and the bond cost would be passed to the lessor via the construction contract.
- In this case, the landlord is an “interested party” regarding the contract, and therefore entitled to be included under the P&P bond by issuing an Dual Obligee Rider – normally for no extra charge.
In this manner we have satisfied the need of the landlord, at no charge to them, and avoided trying to issue a Leasehold Improvement Indemnity Bond (which doesn’t exist!)
Why not put the great minds at FIA Surety to work on your next bond
And don’t forget to check out our Free CE program for agents here.
FIA Surety / First Indemnity of America Insurance Company
2740 Rt. 10 West, Suite 205
Morris Plains, NJ 07950
Providing A rated, T listed bonds in all states!