Understanding and Navigating Maintenance Bonds

As construction projects grow more complex and owners demand longer warranty coverage, maintenance bonds are playing an increasingly important role in contract negotiations. Contractors who understand how these bonds work and how to manage their impact on surety capacity and cost are better positioned to protect their business and maintain strong relationships with both owners and sureties.

Maintenance bonds are typically attached to payment and performance bonds and begin after substantial completion of the project. A maintenance bond, sometimes called a warranty bond, is a surety bond that provides a financial guarantee that a contractor will correct defects in materials and workmanship that arise during a defined maintenance or warranty period after substantial completion. If a defect occurs during the defined period and a contractor does not correct it, the owner can make a claim on the bond.

Challenges around maintenance bonds often stem from longer warranty or maintenance periods on projects. In addition, many jobs now involve new technologies or specialized installations that carry higher performance risk.

Strategies to obtain surety support on these contracts include the following:

• Highlight historically low warranty costs on similar project types
• Explain the approach to the contract and mitigating factors that reduce the potential for defects
• Demonstrate risk transfer for complex systems by linking to manufacturer warranties
• Negotiate contract wording so that the bond covers only defects attributable to workmanship or materials and excludes ordinary wear and tear or misuse
• Propose reductions in bond amount over time to reduce surety tail risk
• Propose tiered maintenance bonds for specific project components, reducing surety risk for certain aspects of the job
• Propose capped remedies and define dispute resolution steps within the contract

Navigating maintenance bond requirements has become increasingly complex as owners push for longer warranty periods and projects incorporate advanced materials and technology. Contractors who take a proactive approach by demonstrating strong performance history, clarifying contract terms, and proposing practical risk-sharing structures can position themselves for better pricing and stronger surety support.

Because every project’s risk profile and maintenance requirement is unique, working with a specialized bond agent is essential. An experienced surety professional can help interpret contract language, negotiate reasonable maintenance terms, and present the contractor’s case effectively to underwriters. The right advisor can make the difference between limited capacity and confident growth, ensuring contractors secure the bonds they need without taking on unnecessary risk.