Condo Warranty Bonds Bond - Statewide in District of Columbia
Table of Contents
Brief Summary
The District sizes this security at 10 percent of your estimated construction or conversion costs, so on a large project it is a significant number. A surety bond satisfies it without locking that money up in cash or a letter of credit against your credit line for the two year warranty period.
Under Section 42-1903.16(b) of the District of Columbia Condominium Act, a developer warrants the units and common elements against structural defects for two years and secures that warranty by posting a bond, a letter of credit or cash equal to 10 percent of the estimated construction or conversion costs. The Department of Housing and Community Development (DHCD) handles structural defect warranty claims against that security.
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How to Apply for a Condo Warranty Bonds Bond:
- Set the bond amount at 10 percent of the estimated construction or conversion costs.
- Prepare the project cost estimate and developer financial statements for underwriting.
- Confirm the bond form and obligee wording with DHCD's Rental Conversion and Sale Division.
- Complete the bond application and review the quoted premium.
- Pay the premium and have the surety execute the bond.
- Deliver the bond to DHCD as the developer's warranty security.
Detailed Information About the District of Columbia Condo Warranty Bonds Bond:
The amount is a percentage, not a flat figure
There is no fixed bond amount. DHCD states that the developer must post a bond, a letter of credit or cash in the amount of 10 percent of the estimated construction or conversion costs to satisfy potential structural defect claims. Both new construction and conversions of existing buildings are covered by that language.
What the warranty covers
Section 42-1903.16(b) of the Condominium Act of 1976, D.C. Official Code Section 42-1901.01 et seq., requires the developer to warrant the common elements and each unit against structural defects for two years. DHCD describes a structural defect as a component installed by the developer that diminishes safety or stability and requires repair, renovation, restoration or replacement. For units, the warranty runs two years. For common elements, the two years start from a later trigger date, including completion of the common elements.
How claims are made
Unit owners or the association file a structural defect warranty claim by email to DHCD with a signed claim letter, a structural engineer's report, correspondence with the developer and three contractor cost estimates. A claim not filed within the statutory two year period is lost. Separately, Section 42-1903.17 allows a breach of warranty suit in D.C. Superior Court within five years of the start of the applicable warranty period.
Before the bond is issued
Confirm the bond form, the obligee wording and how DHCD will accept and later release the security with DHCD's Housing Regulation Administration, Rental Conversion and Sale Division.
Cost
The surety underwrites the developer's financial statements, project budget and track record. Premium follows from the bond amount, which is 10 percent of your cost estimate.
Eligibility and Requirements for a District of Columbia Condo Warranty Bonds Bond:
- Bond amount equal to 10 percent of estimated construction or conversion costs.
- Security for the two year structural defect warranty under D.C. Code Section 42-1903.16(b).
- Bond, letter of credit or cash are all accepted forms of security.
- Coverage for structural defects in both units and common elements.
- Developer financial statements and project cost documentation.
District of Columbia Condo Warranty Bonds Bond FAQs:
At 10 percent of the estimated construction or conversion costs of the condominium.
No. DHCD states the developer may post a bond, a letter of credit or cash. A bond avoids tying up cash or bank credit.
Two years for units and two years for common elements, with the common element period starting from the later trigger date such as completion of the common elements.
By emailing DHCD a signed claim letter with a structural engineer's report, developer correspondence and three contractor estimates within the two year warranty period.
