Beware A Surety's Declination Option In Performance Bonds

In the whirl of paperwork that accompanies construction loans, most developers and their lenders are careful to include the purchase of performance and payment bonds. But do they actually inquire about the terms of the bonds they are purchasing or review them upon receipt, to make sure the terms are correct and best serve their interests? Not necessarily.

Developers and lenders would be well advised to spend more time on the purchase of surety bonds than it takes to put a check mark on their to-do lists. What they may not realize—at least, until they run into a problem—is that there can be significant wording variations in the bonds they are provided.