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What is a Maintenance Bond?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 16 September 2016
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A maintenance bond is a type of bond that is utilized as a warranty or guarantee against possible defects that appear for a specific period of time after work conducted under a contract is completed. This type of bond is commonly used in situations involving construction projects, and provides owners with some avenue of recourse if losses are incurred due to structural defects that were created by that construction. The bond also ensures that the work done under the auspices of the building permit issued by the local government will meet local building codes and standards.

Along with providing a measure of protection to owners, the maintenance bond can also help reduce some of the overall bond costs that are incurred during the warranty period. Typically, this means the amount of any performance bond associated with the construction project is reduced, sometimes significantly. There are some jurisdictions that require the issuance of a maintenance bond, especially on buildings that are constructed for commercial purposes or as facilities for a local, state, or federal government. In other areas, the issuance of a maintenance bond for residential structures is considered optional. Consulting the appropriate local agency that is responsible for issuing building permits will make it possible to determine if a bond of this type is required, and what criteria must be met in order to secure the bond.

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From this perspective, a maintenance bond can be seen as insurance against incurring a loss if the contractor or the builder fails to construct the building in a manner that results in a stable and secure structure. For example, if the builder failed to set the foundation of the building properly, and a year after completion cracks begin to appear in the interior walls and the building façade, the maintenance bond would provide the owner with some recourse to offset expenses in correcting the problem. This may involve covering the costs of having the same builder correct the issue or hiring a different builder to isolate the origin of the defect and take whatever steps are necessary to stabilize the structure.

A maintenance bond is only in force for a specified period of time following the completion of a project and the settlement of the contract related to that project. Should issues arise after the bond has expired, the owner must look to other means of receiving some sort of compensation from the builder. This may include the use of legal action, depending on the particulars of local laws and regulations and the amount of time that has passed since the construction took place.

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