Today, we are going to discuss a bond that’s specifically required in the state of Nevada. In Nevada, there’s a revised statute 108.2403 and 108.2415. For a tenant, building out a space in either an office, a mall, or any sort of property, the landlord can provide what’s called a Notice of Non-Responsibility and that’s pursuant to the two section codes I referenced: 108.2403 and 108.2415. The Notice of Non-Responsibility requires the tenant to post a bond for one and a half times the amount of their contract to build the space. The bond itself guarantees that if a lien is filed against the space related to the work, it’s not the landlord’s responsibility to bond it — it is the tenant’s. If a tenant receives a lien, they would be required to either bond it or pay the lien. The bond protects the landlord in the event the tenant fails to do either.
So, if you’re building out a space in the state of Nevada, you should be ready to obtain a bond for one and a half times the value of the contract amount, which is a source of funds for the landlord or the lienor, if a lien is filed. Like any other bond, it’s an extension of credit and is not a risk transfer. The applicant generally provides a financial statement, and information on the contractor, and the surety begins their underwriting.
One of the things I want to bring up is that if you are the tenant, a way of reducing your risk is by requiring the general contractor to provide a performance and payment bond. The performance and payment bond would guarantee that the contractor is going to build the space and bond any liens that material suppliers or subcontractors may file.
This is a way of reducing your risk, and you should speak to your attorney about deciding on it. It doesn’t completely eliminate your risk, but it makes your bond much easier to obtain. And it also gives you some protection to reduce your own risk.
In addition to your financial statements, one of the other items that a surety is going to require or may ask questions about is your source of financing to build the project.
•Do you know your contractor?
•Have you worked with the contractor often?
•Do you have the funds to pay the contractor?
And then questions for the contractor:
•Do they know their subcontractors?
•How are they addressing any supply chain issues?
These are things that you should start thinking about so that you can have appropriate answers for the surety.
Contact us today to discuss how to reduce your risk and obtain the bond promptly.
PEDERSEN & SONS SURETY BOND AGENCY, INC.
15 Maiden Lane Suite #800
New York, NY, 10038
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