Bond Basics: A Brief Discussion

Disciplinary Bonds

If a license has been revoked—or in some instances, suspended—for a violation of contractors license law, the contractor must file a disciplinary bond with the Registrar to reinstate, reissue or reapply for a new license.

The amount of a disciplinary bond may not be for less than $15,000 or greater than 10 times the contractor license bond, and it must be on file with CSLB for at least two years.

Filing a Bond Claim

A contractor has an obligation not to commit any violation of contractor license law that is grounds for disciplinary action against the license. If the contractor does not comply with the conditions of the bond, a claim can be filed with the surety company.

Claims against a surety company may be filed by homeowners, any person damaged by a willful and deliberate violation of a construction contract, employees damaged by the contractor's failure to pay wages, or an express fund damaged as a result of the contractor's failure to pay fringe benefits for eligible employees. (A court case has held the express trust fund provision superseded by federal law.)

Consumers must file surety bond claims with the surety company that wrote the bond within specified time frames. The CSLB does not process claims against surety companies. Surety companies will investigate any claim filed against a bond, and the CSLB will investigate any complaint filed against the license.

A license bond is canceled 30 days from the date that CSLB receives a cancellation notice from a bond company. If a bond reinstatement notice is not received by CSLB or a replacement bond is not received by CSLB before the end of the 30-day period, the license is suspended.

To make a claim against a cashier's check you must first file a lawsuit against both the licensee and the surety that holds the cashier's check (Contractors State License Board Registrar of Contractors). CSLB can only make payment from a cashier's check under a court order. Once the lawsuit is filed you must serve CSLB with the summons/complaint. If you have already filed a lawsuit, you may be able to amend it to include the Contractors State License Board Registrar of Contractors.

Bond "Checkup"

Contractors are encouraged to perform a bond "checkup" by verifying on the Automated Phone Response System or on the Internet that your bond is current. Most bond renewals and license renewals are not on the same cycle, so do not assume that when your license renews your bond also renews.

Renew promptly:

Avoid a license suspension by renewing your bond promptly and making sure the effective date of the new bond is the same as the cancellation date of the old bond. Allow for processing time by arranging for a new bond four weeks before the old one expires.

Who files:

Ask your bond agent if the surety company will file the bond with CSLB or if you must file it. If you hold the original bond, send it in to CSLB. The CSLB does not return any bond that has been accepted or processed as the bond of record on an active license.

Keep records:

Keep accurate records on your agent, surety company, bond numbers, effective dates, and terms of the bond.