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Homeowner's Guide Residential Construction Bond Claims

Homeowner's Guide Residential Construction Bond Claims

What is a bond?

All residential construction contractors are required to register with the Washington State Department of Labor and Industries (L & I). In order to register with L & I, a contractor must – among other requirements – obtain a bond or post cash security to assure performance of the work and the payment of obligations.

A surety bond is a binding written promise by a third party to perform some act that the residential construction contractor (“principal”) fails to perform. The surety bond must be issued by a qualifying bonding agency and must expressly guarantee the residential contractor's performance of certain obligations. In the case of residential contracting, the bonding company is promising to pay for the completion of the work, but only up to the bond. A residential construction contractor's surety bond must be for $12,000.    

How do I make a claim on a residential contractor's surety bond?

A homeowner may make a claim on a residential contractor's bond by filing a lawsuit against the contractor and the bonding company in the superior court where the home is located or where venue is otherwise proper. A residential homeowner claiming breach of contract has two years to file a lawsuit starting from the earlier of substantial completion or the date they claim project abandonment.

Once filed, service of process on the contractor and the surety can only be accomplished by serving L & I with three copies of the summons and complaint and paying the applicable fee. These documents will then be transmitted by L & I to the contractor and the surety within two days of being received.  At that point, the bonding company will likely investigate the claim and determine whether it should pay you the bond amount. Beware that the surety bond adjuster's interest is to protect the bonding company, and you should be careful in dealing with them without the assistance of an experienced construction attorney.

How do I get paid on my bond claim?

Unless the bonding company agrees to pay the bond amount, the homeowner will need to prove that the residential contractor failed to complete the work or that the work was substandard, and that the homeowner had to spend money to re-do or complete the work.

In cases where the residential contractor engaged in unfair or deceptive acts or practice, a homeowner may be able to triple those expenditures up to $25,000 under Washington's Consumer Protection Act. RCW Ch. 19.86.

If there are multiple homeowners claiming on the same residential contractors' bond, the surety bond proceeds will be split in proportion to such homeowners' claims.


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BAROKAS MARTIN & TOMLINSON

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