Performance Bonds

Who are they for? Main Contractors, Sub-Contractors, Service Providers.

Performance bonds guarantee that the Bonded Principal will undertake and fulfil their contractual obligations agreed with the Beneficiary.

In the event of contractual default (usually via insolvency of the Principal), the Beneficiary will hold security in the form of the bond which will reimburse and pay out losses and damages up to the maximum bond amount.

Warranty and Maintenance Bonds

Who are they for? Main Contractors, Sub-Contractors.

Warranty & maintenance bonds provide security to the Beneficiary for any defective works or faulty materials which may be discovered post project handover, during the maintenance period. Maintenance bonds will either be incorporated into the contractual performance bond that would usually reduce by 50% on practical completion or they will be issued as a standalone bond which replaces the contractual performance bond as a lesser sum.

Deferred Payment (Deferred Consideration) Bonds

Who are they for? Companies making large acquisitions and commercial and residential property developers

When making a substantial purchase for what could be a company or a piece of land, there may be a requirement to pay a fixed sum upon legal completion with the remaining consideration to be deferred over a set period. In cases like this, the seller may require a form of security which ensures that they will receive their deferred monies in the event that the purchaser becomes insolvent or defaults on future instalments. Such security can be provided as a deferred consideration bond (also known as deferred payment bond) which would be issued by a Surety. By deferring consideration beyond the legal completion date, the buyers liquidity/cashflow can be improved.

Road and Sewer Bonds (Section Bonds)

Who are they for? Housebuilders, Property Developers

Developer road & infrastructure bonds (section bonds) are required to be provided to the local authority or council when undertaking works that may interfere with existing infrastructure such as highways, sewers and mains water or creating new infrastructure. These bonds provide security to the local authority against the cost of completing the necessary infrastructure in the event of default.

The types of bonds available include, although are not limited to:

• Road & Highways Act bonds – Section 38, 278, 220 and 21 (Scottish);

• Mains Water & Sewer bonds – Section 98, 104 and 185; and

• Planning bonds – Section 106