My word isn’t my only bond:
A recent article published by Construction News highlighted the number of construction companies that have fallen into financial difficulty. We thought it was important to communicate how we’re helping developer clients protect themselves in such instances and have helped main contractor clients satisfy such requests from their developer/site beneficiary.
The article from Construction News illustrated that:
The current economic situation will have many construction firms reconsidering their risk management strategy. A performance bond is a surety bond issued by an insurance company (or in some instances a bank) to guarantee satisfactory completion of a project by a contractor. Below we have detailed a recent project and situation that we assisted:
Performance Bonds Case Study
Case Summary
Contract value: 8.4m
GDV: £62m
Number of Units: 168
Beneficiary: Housing Association
A main contractor is awarded a contractor to build 164 houses and apartments.
Challenge
As part of that agreement, the Housing Association’s (HA) criteria includes insolvency cover to be in place to protect the HA’s interest, in the event the contractor is declared insolvent during the build period.
This will be for 10% of the contract price and is required until practical completion. This will assist the beneficiary (HA) to mitigate their associated costs, delays and procurement of a new contractor to complete the works.
Solution
In this instance, the client has one of two options:
Place 10% of the contract value in an escrow account for the duration of the build period (cost to contractor £840,000).
OR
Purchase a performance bond via London Belgravia at a total cost of £64,000.
Performance Bonds Benefits
They are available if a contractor fails to meet their contractual obligations
The owner does not need to incur additional costs
Real alternative to bank bonds and letter of credit
Protects developer funds
Offers comfort for the funders while delivering assurance of project completion
About London Belgravia Brokers
Construction disputes are expensive and time- consuming. We want to help keep both developers and contractors building. To ensure that you are protected or if you have been asked to put a bond in place, speak to our specialist team today
London Belgravia Brokers are experts in specialist risk insurance products for property developers, in addition to performance bonds we can also provide building warranty (Latent Defect Insurance) schemes.
Our Team has in excess of 40 years’ experience in the sector. Obtaining specialist property insurance and can be a difficult process with lots of form filling, additional questions from insurers and time spent chasing an actual quote.
We take away that pain by managing the process for you and ensuring you receive the best price for the most appropriate cover to meet your requirements.