Do Right of Way Bonds Cover Public or Private Projects?
Do Right of Way Bonds Cover Public or Private Projects? - Comprehensive Guide
What is a Right of Way Bond?
A right of way bond, often referred to as a ROW bond, acts as a guarantee for property owners during publicly owned right of way projects. It ensures property owners receive financial compensation for damages caused by public initiatives on their private property.
On the flip side, individuals undertaking private projects that impact public right of way may need a ROW bond. This bond serves as a protective measure for the city or municipality, ensuring that if the sidewalk or street isn't properly restored after the private project, funds are available to cover the costs.
Right of way bonds are a subset of subdivision bonds and typically fall into categories such as construction, performance, or permit bonds. Their primary purpose is to ensure fairness and protection for all parties involved in publicly owned right of way projects.
Who Uses Right of Way Bonds?
Developers, contractors, and property owners utilize right of way bonds for infrastructure projects that impact or require access to private property. Obtaining a right of way bond allows stakeholders to fulfill their legal and financial obligations to property owners affected by development confidently.
What is a Publicly Owned Right of Way?
A publicly owned right of way refers to land designated for public use, such as roads, sidewalks, bike lanes, and utilities, which may intersect with private property. These paths are vital for urban development, ensuring safe and efficient transportation and utility services for communities.
When is a Right of Way Bond Necessary?
Right of way bonds are essential for projects that impact private property for public purposes, including the installation of turn lanes, signals, utilities, and other infrastructure improvements. They are typically required before permits are issued for publicly owned right of way projects to protect property owners throughout the project’s duration.
What is Needed to Underwrite Right of Way Bonds?
The requirements for underwriting right of way bonds vary based on bond size. Smaller bonds (up to $75,000) can often be issued instantly without additional information. Bonds ranging from $75,000 to $250,000 require only a credit check and project details. For larger bonds (over $250,000) credit checks and financial statements will be requested to assess the financial stability and reliability of the bond issuer.
Navigating Claim Procedures
All right of way bonds operate under the basic premise that if damage occurs to private property due to right of way activities (e.g., construction equipment causing damage), the property owner can file a claim against the bond for repair or restoration costs. Valid claims are paid out by the surety, with the bondholder responsible for reimbursing the surety in full.
How do I get a Surety Bond?
Surety bonds are issued by Merchants Bonding Company (Mutual) through insurance agents. Contact your local insurance agent or use our Find an Agent tool. They will guide you through the process, informing you of what documents and information are needed by the surety (Merchants Bonding Company (Mutual)) to underwrite your bond.
What is a Surety Bond?
A surety bond is a three-party agreement that ensures the fulfillment of a commitment or contract. For instance, the surety (Merchants Bonding Company (Mutual)) may provide a surety bond to a construction company (the principal) which is required by the state (the obligee), ensuring the construction company will perform the duties as outlined in the contract. In bonding the construction company, Merchants assumes the risk should the company default or not fulfill their contract. A surety bond is different from traditional insurance in that the principal is obligated to pay back the surety company on any claims paid out.
All information provided is subject to change.