Surety Bond News

SB1289, enacted on April 28, 2008 and made effective October 10, 2008, created flood protection districts and a Board of Directors for each district to construct flood protection facilities. The new law states that performance and payment bonds are required for any construction, and clarifies the process for claims against the performance and payment bonds. The surety has 60 days to act upon a contractor found to be in default by the board or the board may re-let the contract. If the costs to complete the project surpass the finances available for payment, the defaulting contractor’s surety has 20 days after mailing of the notice to satisfy the board’s demand for payment of the difference. This demand cannot be more then the penal sum of the bond, and monies must be used to pay for the costs of completing the work. Delivery of writ may be served on the Surety’s principal office or it’s Attorney-In-Fact. If there is no office or Attorney-In-Fact, it may be service on the insurance commissioner.

HB 2474 was enacted by the state of Arizona on April 28, 2008 and became effective October 10, 2008. It was created to amend the current mechanic’s lien discharge and discharge bond laws. It is required that bonds for lien releases be in the amount of 150% of the claim under the existing law, and the bonds can be posted by any original contractor, subcontractor or construction lender. This enactment clarified the law so that upon the recording and service of the surety bond discharging the lien, funds withheld with regard to any issued stop notice on the construction project shall be released. The enactment also grants the person filing a stop notice with a lien the permission to post a surety bond (bonded stop notice). The amount of the claim required for a stop-notice bond has been increased from 125% to 150% under the new law.

Additionally, if the construction lender or any original contractor or subcontractor disputes a stop notice or bonded stop notice, the party can post a bond in the amount of 150% of the claim. This has been increased from 125% by this new law. It also states that a bond provided for the lien release may also be used as the bond for the release of stop notice on a project, as well as for the release of any funds withheld in regards to the stop notice.