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 your New Mexico contractor license bond needs.
What Are They?
License and permit bonds are required by various state and local government agencies to ensure that licensees and permittees of all kinds do business in accordance with applicable laws. They provide financial protection for the agency issuing the bond and for the consumers using the services of a bonded license or permit holder. New Mexico contractor license bonds are a form of license and permit surety bond required by the New Mexico Construction Industries and Manufactured Housing Division of the Regulation and Licensing Department.
Signing the surety bond agreement for a New Mexico contractor license bond legally obligates a contractor to comply with NMSA1978, Section 60-13-43 and the building codes established in NMAC Title 14, Chapters 7 through 10. In fact, the official title of New Mexico contractor license bonds was changed to “New Mexico code compliance bonds” in 2009, in recognition of the important role they play in ensuring adherence to building codes. However, most people still refer to them as contractor license bonds.
New Mexico contractor license bonds also provide recourse for consumers who suffer a financial loss as a result of a contractor’s violation of the terms of the surety bond agreement.
Who Needs Them?
New Mexico requires contractors doing work related to construction to be licensed in order to work legally within the state. Specifically, general contractors and specialty contractors in the electrical, mechanical, plumbing, and LP gas trades all must be licensed at the state level.
Any contractor applying for a new license or renewing an expiring license must purchase a $10,000 New Mexico contractor license bond.
Speak with a Surety Bond Professionals agent today to discuss your bonding needs.
How Do They Work?
Every surety bond agreement is a legally binding contract between three parties, referred to in surety bond lingo as the obligee, the principal, and the surety:
- The New Mexico Construction Industries and Manufactured Housing Division, the party requiring the bond, is the “obligee.”
- The contractor, the party required to purchase the bond, is the “principal.”
- The bonding company approving the contractor license bond is the “surety.”
Let’s say that the principal cut some corners in laying pipes beneath the concrete slab foundation of a home under construction, resulting in a slab leak before construction is even completed. The developer who hired the contractor can’t get the contractor to correct the problem without additional charges, and files a claim against the contractor’s New Mexico license bond.
As the bond’s principal, the contractor is legally obligated to pay all valid claims. However, it’s common practice for the surety to pay the claim on behalf of the principal if no other settlement can be reached. In doing so, the surety is extending credit to the principal, which creates a debt that the principal is required to repay.
What Do They Cost?
New Mexico contractor license bonds typically are sold for an annual premium that is a small percentage of the required $10,000 bond amount, though some surety bond companies sell them for a flat fee.
The premium rate is based on the surety’s assessment of the principal’s creditworthiness. The single most important factor in determining the premium rate is the principal’s personal credit score. A principal with good credit will pay a premium rate in the range of 1% to 3%.
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Our surety bond professionals will get you the New Mexico contractor license bond you need at a competitive rate.