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Stop Notice Bond: The stop notice bond guarantees to the owner, original contractor or construction lender if they suffer damages as a result of the stop notice claim. If the principal serve a stop notice on the construction loan lender or owner of the project, and there is still money to be paid out under the loan, the lender or owner will hold back sufficient money to pay the principal's claim. Principal still has to proceed with the lawsuit enforce the stop notice. Stop notice bonds are usually issued at 125% of the stop notice amount. The additional 25% represents potential court fees and legal expenses as a result of the claim.
******** In submitting the initial request for bonding, the following information should be included to insure a quicker response.
1) A complete court bond application - Will provide a basic overall of the bond being requested, as well as information on the principal requesting the bond.
2) Copy of the stop notice - The stop notice will provide information as to who provided the funding/lending for the project, as well as the amount that the principal claims has not been paid. The amount of the stop notice bond will usually be 125% of the stop notice amount.
3) Copy of the contract - Copy of the contract between the principal and the party for which the principal performed work on and was not paid for.
4) Business Financial Statements: If the principal requesting the bond is a corporation, provide the most recent year business financial statements (balance sheet and income statement). In addition to the business financial statement, a personal financial statement of all the owners of the corporation should be provided as well.
5) Personal Financial Statement: If the principal(s) is an individual, provide a personal financial statement for the principal(s).
6) Current Bank Statements: If the corporation or individual's financial statement has a high declaration of short term/liquid assets (cash, stock and securities), current statements to verify these assets should also be provided.