Today, I want to speak about the regulatory requirements for the surety bond as a remediation funding source in New Jersey, pursuant to the New Jersey Department of Environmental Protection (NJDEP).
There’s an administrative requirement for remediation of a contaminated property pursuant to N.J.S.A. 58:10B-3, N.J.A.C. 7:26C, and N.J.A.C. 7:26C-5. This is for when an owner of a property is required to remediate an environmentally contaminated site or property that they own, in order to satisfy the NJDEP requirement. Owners can either put up a cash deposit with the State of New Jersey or obtain a surety bond which will provide a source of funding to make sure that the work to remediate the property is completed and done properly. The bond amount would be set by the State of New Jersey, which also requires the use of their own bond form.
Generally, what a client would do if they own the property, and they are required to satisfy this requirement, includes:
•Having the bond amount set by the State of New Jersey,
•Finding a contractor to perform the work, and
•Obtaining the bond through my office.
•Provide a financial statement for the surety to review to underwrite the surety bond.
The property and the owners would be required to indemnify the surety for this obligation. Once that is done and the bond is filed, the chosen contractor can start the work.
Regarding the bond itself, there is something to note: the bond can be canceled by the surety by sending written notice to the State of New Jersey, which also requires the Department of Environmental Protection to release the bond. The bond is fixed and is sum certain. As the work is being done, it’s suggested that the property owner apply to the Department of Environmental Protection to release part of the bond so that they can limit their risk, and the surety’s risk, related to the obligation. The reason the bond principle would want to limit the surety’s risk is that they indemnify the surety for the bond. By limiting the surety’s risk, they limit their own, as well.
In summary, to move forward with remediation and clear a property of a contaminant, an owner needs to either put up cash or obtain a bond. If they choose to obtain a bond from a surety licensed to do business in the State of New Jersey, financial statements are required.
Neil Pedersen
PEDERSEN & SONS SURETY BOND AGENCY, INC.
15 Maiden Lane Suite #800
New York, NY 10038
212-227-7277
800-720-7277
neil@courtbondnow.com
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