Maintenance Bond

Posted in Finance, Accounting and Economics Terms, Total Reads: 555

Definition: Maintenance Bond

A maintenance bond is like an insurance for the owner of a newly constructed property which gives him the right to claim for any damage with respect to construction materials used, incomplete or improper design constructed in his property.

The maintenance property is bought by the contractor and he is liable to compensate by reconstruction/re-design for any damages arising during the period for which the bond has been issued and claimed by the owner of the property. 

However, it should be noted that a maintenance bond is not an actual insurance though its functionalities are similar to that of an insurance. Also, the estimated compensation or redevelopment may vary and it may not be feasible to estimate the exact pricing of a maintenance bond. Thus, the contractor is liable to redevelop or reconstruct any portion of the property that has suffered a defect.

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