Forests are a public resource, providing we the people with timber for professional, public, and personal uses. Removing trees can help both contractors and landowners earn money, and if it is done properly, it can be done in harmony with the local ecosystem. However, when trees are removed incorrectly, harm to nearby waterways and surrounding wildlife is possible.
Therefore, when a landowner aims to sell trees on their land, whether they are a private person or a government agency, they may feel the need to seek out financial protection. In this kind of contract, timber sale contract surety bonds offer that protection.
What is a Timber Sales Bond?
A kind of contract bond, timber sales bonds ensure contract performance. However, the terms of these bonds are different from typical construction contracts. For example, a standard construction contract bond is usually between an obligee—a government entity who needs the job finished—and a principal—the contractor—with the surety backing up the bond and the financial guarantee. If somehow the project isn’t finished, the obligee can come after the principal by making a claim against the bond that the surety pays.
Timber sales bonds are a little different. They are similar in that their aim is to ensure the terms of contracts are adhered to; if everything goes as planned, the obligee pays the contractor, but if it doesn’t, the obligee can make a claim and be paid by the surety.
However, with timber sales bonds, the guarantee is that the principal will pay and remove the trees; the payment is for access. This means that if all goes to plan, the principal will pay the obligee and remove the trees as directed by the contract’s terms. The bond covers the payment itself, which goes to the obligee, and the proper timber removal as well. Therefore, claims can arise either from a principal’s failure to pay or from a failure to remove the timber properly (or at all).
Of course, as with other surety bonds, when a valid claim is paid out, the principal is ultimately responsible. When the surety pays the obligee, it will then seek to recover the amount paid from the principal.
Why Are Timber Sales Bonds Needed?
The Forest Service, as well as other forest managing entities, both public and private, can allow principals to harvest timber for a sum of money—these kinds of transactions form the basis for timber sales contracts. To bid on these kinds of contracts, most federal, other public, and private agencies or companies require a timber sales bond. This way, they can be sure that the principal will adhere to the terms of the contract.
Obligees with timber sales bonds in place can feel more certain about the job being done, the payment being made, and the timber being removed in a way that is congruent with good forest management. For example, timber contract terms will usually protect natural resources like water and soil, and guard against erosion, flooding, and damage to roads.
A detailed, carefully drafted timber sale contract backed up by a timber sales bond is among the best ways to ensure that all parties understand and adhere to the terms.
How to Get a Timber Sales Bond
Timber sales contracts can be very detailed, and this means that the underwriting process for associated timber sales contract bonds can be somewhat involved. The surety must assess all relevant facts to determine the chances of a claim against the bond being made. Usually, this will include a review of a contracting company’s credit standing, financial standing, project history, and active projects. Throughout this process, the surety will be working to answer one overarching question: does the principal possess the material and financial abilities to fulfill their contractual obligations?
Some things that sureties frequently require to underwrite a timber sales bond include:
- Bond application
- Asset verifications
- Bid tabulation
- Breakdown of job costs
- Copy of the contract
- Evidence of any pending timber sales
- Financial statements
- Schedule of work on hand
Every application for any kind of contract surety bond is determined by a unique set of facts. This means requirements may vary. To get the full details, speak with an experienced surety professional.
Timber Sales Bonds at Viking Bond Service
Viking Bond Service has experience with timber sales bonds, and we work hard to get the best possible terms for our clients. We also work with the SBA Surety Bond Guarantee program as needed for certain projects. Just like with every other contract bond, Viking Bond Service is your best option. Contact us now to get started.