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Lease Guarantee Bond

lease guarantee bond

A lease guarantee bond serves as a guarantee that the terms and conditions outlined in a commercial lease agreement will be meet. These terms can include early termination of the lease, maintenance of the property and, at times, hours of operation.

How Does a Lease Surety Bond Work?

A lease surety bond is a type of financial guarantee surety bond which, very basically, serve to guarantee payments from the principal to an obligee. The lease guarantee bond provides a simpler path of recourse for the commercial landlord for instances where the commercial tenant fails to meet the terms of the lease covered by the surety bond. When a tenant violates one of these lease terms, the landlord can claim on the bond for an amount deemed necessary to remedy the violation, not to exceed the bond amount. The tenant is held responsible by the surety for any amount paid on a valid claim.

Typically, a lease guarantee bond is requested as part of the leasing process, and the amount of a bond varies depending on the lease agreement.

Although each lease guarantee bond is different, they all feature common provisions. For example, a lease guarantee bond will stipulate that liability will not accrue to the principal and surety bond provider until the landlord has fulfilled all of the obligations of the lease agreement. Also, all lease guarantee bonds feature a start and end date.

A cancelation provision may be included as part of a lease surety bond. Meanwhile, a landlord may require a lease guarantee bond to include a provision that provides replacement security as well.

How Can You Obtain a Lease Surety Bond?

A commercial tenant required to be bonded to qualify for a commercial lease would apply for the bond. The surety likely will complete an in-depth underwriting process to ensure the tenant can meet various financial requirements.

In addition, a lease guarantee bond company will require a tenant to sign a general indemnity agreement. This protects the lease guarantee bond company in the event that a bond claim is filed.

What Information Will You Need to Provide to Obtain a Lease Guarantee Bond?

A commercial tenant may need to provide a variety of information to obtain a lease guarantee bond, including:

  • Commercial Bond Application: The commercial bond application provides a lease guarantee bond provider with information about the principal.
  • Lease Agreement: The lease agreement offers details about the terms and conditions of the lease, along with the pact's start and end dates.
  • Business Financial Statements: Balance sheets, Profit and Loss/Statements are often required as part of a lease guarantee bond request.
  • Current Bank Statements: These statements provide details about the financial assets available to a principal.

At times, a surety may require the bond to be collateralized. Lease guarantee bonds are considered a higher risk than other types of surety bonds and collateral is used sometimes to help mitigate the risk to the surety.

Request a Lease Guarantee Bond Quote from Viking Bond Service

Viking Bond Service provides lease guarantee bonds nationally. We let our clients know exactly what will be needed to obtain the lease surety bond. The first step is to either call us, complete the contact form and we’ll call you, or complete the online application.

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