The State of California guides the actions of contractors in the state through the use of surety bonds. One of such bonds is the disciplinary bond. If you’re working as a contractor in CA, you must know these bonds, purchase them, and uphold the requirements. You may not know it yet, but these bonds are necessary for the success of your business. So, let’s explore the disciplinary bond a little bit more.
What is a Contractor Disciplinary Bond
This bond is another type of surety bond. The State demands a disciplinary bond from every contractor whose license is under suspension or has been revoked. Many people in the industry call it a punitive bond. However, this bond is necessary to protect the parties to a contract. With this bond in place, contractors operate by the laws guiding their license. So, any contractor who wants a new license or reinstatement is required to file for the bond. But bear this in mind, it’s not all the suspension that permits for the filing of this disciplinary bond.
Requirements of the Contractors Disciplinary Bond
If your firm’s license has been suspended or revoked, it is mandatory to file for this bond with the contractor’s registrar. That is if you are seeking for a reissue or reinstatement. However, you have to fulfill some requirements:
- File for the contractors disciplinary bond alongside other surety bonds that are necessary if any. However, filing them together doesn’t mean that the additional bond will replace the disciplinary bond. Also, it doesn’t mean that the bonds will be combined to maintain your license.
- The amount your firm pays for the bond will depend on the level of contract violation charges against it. Nevertheless, the registrar has to determine the amount. But according to Section 7071.8 of the Business & Professions Code, the cost of the bond is not below $15,000 and not above 10X the amount of the contractor’s bond.
- Another requirement is that the disciplinary bond must be with the contractors’ Registrar for two years. During this time, the contractor’s license should be active, and, the regulators will be watching every project closely.
- The surety company writing the bond must be operating with a license from the CA Department of Insurance. The AG office must approve the form which the surety company will use to write it. Once the surety company writes the bond, their attorney must sign it.
- After writing and signing the bond, it must get to the Contractors State License Board offices within ninety (90) days of its effective date.
What is the cost of a Disciplinary Bond
Already, we’ve pointed out that the contractor’s Registrar determines the amount a firm will pay for the bond. However, many factors come to play in deciding the exact cost. For instance, the severity of the violation against a contract determines what the surety company will write. If the offense is little, it’ll translate to lower financial risk and require a small bond. But, if the infraction is severe, it will require a larger bond.
Apart from the above, other factors that will determine the amount for the bond are your work history, credit, and financials. Sometimes, the premiums for disciplinary bonds can be very low or up to ten percent depending on the situation.
Contractors have other alternatives which are, to file for a certificate of deposit or use cash from the CLSB. These alternatives are covered by Section 995.710 of the Code of Civil Procedures. But there is a problem with these alternatives. For instance, the collateral will remain in the custody of the CSLB for three years after the bonding period ends. That’s why many contractors don’t ever go near to choosing them over the disciplinary bond.
Is the contractor’s Disciplinary Bond Important?
Many contractors sometimes complain about the requirements of the disciplinary bond, but at the end of the day, they appreciate it. You know why? It’s the only way to keep working after violating the contractors’ regulations. Yes! Instead of folding your arms and waiting for reinstatement, purchase the contractor’s disciplinary bond, and continue your projects.
Secondly, if you want to get your license as fast as possible, go for the disciplinary bond. Remember that the CSLB monitors everything you do during the bond period of two years, once they confirm that you’ve cleaned up your act, your license will be issued again.
Finally, this bond is another way of telling your active and potential clients that they can trust your firm.
We can’t ignore the fact that the process is usually tasking, but it’s better to pass through it and achieve your goals. Therefore, if your license is under suspension right now, or has been revoked you can visit https://www.contractorbond.org/california-disciplinary-bond/.