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Army Veteran Owned | Expert Surety Bonds Since 2004
Have a question? +1 815-826-6324 (815-8-BondAI) phil@AmericasSuretyBonds.com
Army Veteran Owned | Expert Surety Bonds Since 2004
When a landlord lets a tenant run its own build out, the landlord wants assurance the space will be finished to the approved plans and not left half built. A lease tenant improvements performance bond gives the landlord that assurance, and it lets the tenant satisfy the lease without handing over a large cash deposit or letter of credit.
A lease tenant improvements performance bond guarantees to an Arizona landlord that the improvements a tenant has agreed to build in leased space will be completed as the lease requires. The obligee is the landlord named in the lease, and the bond amount, form and deadline come from the lease or its work letter. Confirm the exact bond form and delivery steps with the landlord before the bond is issued.
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This bond is not filed with a state agency. It is required by the lease. When a commercial lease allows the tenant to design and build its own improvements, the landlord often requires a performance bond before construction starts. The landlord is the obligee, the tenant or the tenant's contractor is the principal, and the surety guarantees that the work will be completed according to the lease and the approved plans. If the principal fails to finish, the landlord can make a claim on the bond, up to its penal sum, for the cost of completing the work.
The lease decides who must furnish the bond and for how much. Some leases put the obligation on the tenant. Others require the tenant's general contractor to furnish it with the landlord named as obligee or as an additional obligee. The amount is whatever the lease or the tenant improvement work letter specifies. Read those sections closely before you apply, because the surety will write the bond to match them.
Arizona gives contractors, suppliers, laborers and design professionals lien rights against the building or improvement they work on under ARS 33-981. Subsection B of that statute treats every contractor, subcontractor, architect or builder in charge of the construction as the agent of the owner for lien purposes. A landlord whose building is being altered by a tenant has real exposure if the build out stalls or goes unpaid.
The performance bond guarantees completion. Arizona's lien law has a separate instrument in ARS 33-1003, a payment bond that an owner may require from the person it contracts with and record with the contract. If your lease calls for both a performance bond and a payment bond, you need both, and the lease will say so.
Under ARS 32-1151 it is unlawful to act as a contractor in Arizona without a license in good standing from the Registrar of Contractors, unless an exemption applies. Most landlords and sureties will ask for the contractor's ROC license number before the bond is written.
This is a contract bond, so underwriting looks at the job as well as the applicant. The surety reviews the lease terms, the construction contract and budget, the contractor's experience and financial statements, and the credit and financial strength of the tenant or contractor who signs the indemnity. The premium is quoted on the specific bond amount and project before you commit.
The landlord named in the lease. If the landlord has a lender, the lease may also require the lender to be added. Check the lease wording and confirm with the landlord before the bond is issued.
By the lease. The bond clause or the tenant improvement work letter sets the amount. The surety writes the bond to that figure once it has reviewed the project.
It guarantees completion of the work. Payment to subcontractors and suppliers is a different obligation, and Arizona's lien law addresses it through a separate payment bond under ARS 33-1003. If the lease requires both, you need both bonds.
Either, depending on the lease. Some leases make the tenant the principal and others require the tenant's general contractor to furnish the bond. The lease language controls.
The premium is based on the bond amount and on underwriting of the project, the contractor's experience and finances, and the credit of whoever signs the indemnity. You get an exact quote for your project before you buy.
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