New Jersey Construction Bonds
Surety Bond Professionals is a family-owned and operated bonding agency with over 30 years of experience. With access to a broad range of surety markets, our expert agents are ready to assist with all of your New Jersey construction bond needs.
What Are They?
New Jersey construction bonds may be required under the state’s “Little Miller Act” (New Jersey’s version of the federal Miller Act). These typically include performance bonds that guarantee completion of the project and payment bonds that guarantee payment of all subcontractors, workers, and suppliers in accordance with the terms of a public works contract.
This bonding mandate applies to state and local government-funded projects valued at $200,000 or more, with a required bond amount—or penal sum—equal to 100% of the contract value. It also applies to projects involving school facilities valued at $100,000 or more.
New Jersey’s laws regarding the licensing and bonding of construction contractors are not as strict as those of many other states. The bonding requirements that do exist serve to protect the state against financial loss due to the unlawful or unethical business conduct of contractors. They also provide a source of funds to compensate the victims of such conduct for their financial loss.
Although license bonds are not required at the state level in New Jersey for most contractors, home repair contractors executing financed repair contracts must purchase a license and permit bond in order to operate legally within the state. This does not apply to cash contracts paid in installments, only to those that are financed and fall under the jurisdiction of the New Jersey Department of Banking and Insurance.
Also, be aware that some municipalities require contractor license bonds. For example, Jersey City mandates a $15,000 contractor license bond.
Who Needs Them?
You’ll probably need one or more contract bonds if the work you will be doing meets any of the conditions described above. Specifically, projects such as the following will likely need a contract bond:
- Bidding on or carrying out certain public works projects will likely require bid bonds and performance & payment bonds
- Home repair work under a financed repair contract
- Contracting work in a local jurisdiction that requires a contractor license and permit bond
Speak with a Surety Bond Professionals agent today to discuss your bonding needs.
How Do They Work?
All construction bonds work in much the same manner. The surety bond agreement sets forth the conditions that the contractor must meet in order to avoid claims against the bond. When a claim is filed by the project owner (the “obligee” in the surety bond agreement) or other injured party, the surety bond company (the “surety” for short) will investigate to make sure it’s legitimate and negotiate a settlement if possible.
When no settlement can be negotiated, the surety will go ahead and pay the claim on behalf of the contractor (the “principal”). In doing so, the surety is essentially lending the principal money to cover the claim—money that the principal is legally obligated to repay to the surety.
What Do They Cost?
The cost of a New Jersey construction bond is a small percentage of the required bond amount. The surety will determine what that percentage—the premium rate—will be based on the principal’s personal credit score, as well as personal and business finances and industry experience.
A high credit score and strong financials earns the principal a low bond rate, but those with poor credit will often pay a higher rate.
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Our surety bond professionals will get you the New Jersey construction bond or bond program you need with the most competitive terms.