Surety Bonds For Pool CONSTRUCTION

Robin Kix of Lance Surety explains what pool contractors need to know about surety bonds for the pool construction trade.

BY ROBIN KIX - LANCE SURETY

If you are a contractor who is involved in pool construction or making other outdoor site improvements, you might be required to obtain a contractor’s license and a license bond.

Swimming pool contractors in some states are required to obtain specialized licenses, and bonds are frequently required as a condition of licensing.

For example, California requires swimming pool contractors to obtain a swimming pool contractor license, which carries a bonding requirement as a licensing condition. Other states, including Florida and Texas, also require bonds for pool contractors who perform electrical work on pumps and other components of pool installation.

Even if your state does not require you to obtain a specialized license for pool construction work, you might have to get a general contractor’s license and post a bond to perform work above a certain amount.

In addition to license bonds, there are other types of contractor bonds that you might need based on the size of a project or the requirements of the project owner.

Here is some information about contractor bonds for pool contractors and those who perform work on other outdoor improvements.

What is a Surety Bond?

A surety bond is a legally binding agreement between the following parties:

• Principal – The individual required to post a bond.

• Obligee – The party, which might be a governmental licensing authority or private project owner, that requires the bond.

• Surety – The bond company that approves and issues a bond as a guarantee the principal will comply with its legal and contractual obligations.

Surety bonds are not a form of insurance. Instead, they protect the obligee and the public against potential misconduct on the part of the principal.

When a bond company approves a surety application, the principal must sign an indemnity agreement through which it agrees to hold the surety harmless in the event of a filed bond claim and loss. Ultimately, the principal is the party who will be responsible for paying valid bond claims that might be filed.

License bonds are bonds that might be required as a licensing condition before a contractor can secure a license. These bonds might be required by a state licensing body or by a city or county before a contractor can obtain a license or certificate to perform work in the jurisdiction.

Many contractors who perform work on outdoor improvements or construct pools might also be required to post contractor bonds. A contractor bond is a type of surety bond that guarantees the contractor will perform work that meets the provisions called for in a contract.

These bonds might be required for public projects valued at $100,000 or more. Many private project owners also require bonds before they will enter into contracts with pool contractors and those who will perform work on other outdoor improvements. The following three types of contractor bonds are common:

Bid bond – A bond that might be required as a condition of bidding on a project that guarantees the winning bidder will follow through and perform the contract at the bid price even if the contractor forgot to include something in the bid.

Performance bond – A bond that might be required by a public or private project owner that guarantees the contractor will perform according to the provisions called for under the contract and will not complete substandard work.

Payment bond – A bond that guarantees the general contractor will pay its subcontractors and suppliers for their labor and materials that protects the subcontractors and suppliers as well as the private project owner. Payment bonds protect private project owners from potential mechanic’s liens that might otherwise be filed by parties that have not received timely payments for their work from the general contractor.