Who may require the prime contractor to obtain a performance and payment bond?

Who may require the prime contractor to obtain a performance and payment bond?

• A. Landlord
• B. Tenant
• C. Architect
• D. Homeowners association

Answer: (B)

A performance and payment bond protects the party funding and controlling the project by guaranteeing that the contractor will complete the work and pay subcontractors and suppliers. In a tenant improvement scenario, the tenant is the one hiring the prime contractor and funding the work. Because they stand to lose if the contractor defaults or doesn’t pay subs, the tenant has the strongest reason to require such a bond. The landlord would only have that leverage if they were the project owner financing the work, and the architect or a homeowners association typically does not require bonds for a project they’re not funding or managing. Therefore, the tenant is the party most likely to insist on a performance and payment bond.

A performance and payment bond protects the party funding and controlling the project by guaranteeing that the contractor will complete the work and pay subcontractors and suppliers. In a tenant improvement scenario, the tenant is the one hiring the prime contractor and funding the work. Because they stand to lose if the contractor defaults or doesn’t pay subs, the tenant has the strongest reason to require such a bond. The landlord would only have that leverage if they were the project owner financing the work, and the architect or a homeowners association typically does not require bonds for a project they’re not funding or managing. Therefore, the tenant is the party most likely to insist on a performance and payment bond.