Understanding Performance Bonds in Florida What Contractors and Property Owners Need to Know

1. Understanding Performance Bonds in Understanding Performance Bonds in Florida: What Contractors and Property Florida: What Contractors and Property Owners Need to Know Owners Need to Know In Florida’s dynamic construction industry, ensuring that a project is completed as agreed is a top priority for developers, contractors, and government agencies alike. One of the most effective tools used to safeguard this commitment is a performance bond. Whether you’re a contractor bidding on a government job or a project owner protecting your investment, understanding how performance bonds in Florida work is critical to project success. In this blog, we’ll break down what performance bonds are, how they function in Florida’s legal and construction landscape, and what both contractors and property owners should know before entering into a bonded agreement. What Is a Performance Bond? A performance bond is a type of surety bond that guarantees a contractor will complete a construction project in accordance with the terms and conditions of the contract. It involves three parties: •Principal – the contractor or party doing the work •Obligee – the project owner (can be private or public) •Surety – the bonding company that provides the financial guarantee If the contractor fails to meet their obligations, the surety company steps in— either by paying the project owner damages (up to the bond limit), hiring a replacement contractor, or completing the project themselves. Are Performance Bonds Required in Florida? Yes—Florida law mandates performance bonds for certain types of public construction projects.

2. Under Florida Statute 255.05, performance and payment bonds are required for public projects exceeding $200,000. These bonds ensure that not only will the work be completed, but that all subcontractors, laborers, and suppliers will also be paid. For private construction projects, performance bonds are not legally required but are often voluntarily included to reduce risk and build trust. Benefits of Performance Bonds in Florida •For Project Owners: oRisk mitigation: Protects against contractor default or poor performance oProject completion assurance: Ensures financial coverage if issues arise oCredibility check: Validates the contractor’s financial and professional reputation •For Contractors: oIncreased credibility: Shows financial stability and reliability oAccess to larger projects: Required for public jobs and large-scale developments oCompetitive edge: Demonstrates professionalism and commitment to clients How Much Does a Performance Bond Cost? Performance bonds in Florida typically cost 1% to 3% of the total contract value, depending on: •Size of the project •Creditworthiness of the contractor •Financial strength and experience of the principal •Type of construction work involved Contractors with excellent credit and a solid track record may pay on the lower end of that range.

3. How to Obtain a Performance Bond in Florida Contractors must apply for a bond through a licensed surety or bonding agency. The process generally involves: •Application submission – including company financials, project details, and references •Underwriting and risk assessment – the surety evaluates your financial health, history, and capacity •Bond issuance – if approved, the bond is issued and delivered to the obligee Many Florida-based sureties specialize in construction bonding and understand the state’s unique legal environment, building codes, and regulations. What Happens If a Contractor Defaults? If a contractor fails to meet the contract terms (such as abandoning the project, performing substandard work, or not completing on time), the obligee can file a claim against the performance bond. The surety will investigate and determine: •If the claim is valid •How to proceed—this could involve paying for the damages, hiring a replacement contractor, or completing the project It’s important to note that the contractor (principal) is ultimately responsible for reimbursing the surety for any losses. Final Thoughts Performance bonds in Florida play a vital role in protecting construction projects, especially in the high-risk, high-reward world of building and development. Whether you’re a property owner ensuring your project finishes on time and within budget, or a contractor looking to grow your business and bid on larger jobs, understanding the role of performance bonds is essential.

4. Need help securing a performance bond in Florida? We can connect you with trusted bonding agents and surety providers who specialize in Florida construction projects.