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What is a Bond Claim?

Kristin Alford Oct 28, 2025 1:30:00 PM

Preliminary Notices & Construction Credit Bond Claim Credit Basics

Bond Claim Basics

A bond claim is a written notice to the surety that the claimant (such as a subcontractor or material supplier) is looking to them for payment.

Public and federal construction projects generally require general contractors to obtain a payment bond. The payment bond provides assurance of payment to certain parties if the principal of the bond breaches their contract.

Unlike mechanic’s liens, which attach to property, bond claims provide payment protection without encumbering the project owner’s real estate.

Other Names for Bond Claim

The term “bond claim” is broad. Often, the name depends on the type of bond, such as a surety claim, payment bond claim, performance bond claim, or bid bond claim.

The terminology may also vary by state. For example, in Texas, a bond claim (also called a 3rd month notice) is known as a Sworn Statement of Account.

Who Is a Party to a Payment Bond?

There are 4 primary parties tied to a payment bond:

Principal (Obligor): The party whose bond it is (typically the contractor).

Obligee: The party requiring the bond (often the project owner or higher-tier contractor).

Surety: The bond or insurance company issuing the bond.
Claimant: The subcontractor, supplier, or laborer protected by the bond.

Obligee

The obligee is the party protected by a bond, the one who requires the bond to be furnished.

Obligor

The obligor (aka principal) is the entity that has an obligation to pay a debt; the party required to furnish a payment bond.

Here’s an example. Where the obligee is the project owner, the principal is the general contractor (or prime contractor); where the obligee is the general contractor, the principal is the subcontractor.

Surety

The surety is the one who agrees to answer for the debt or default of another, usually an insurance company that is compensated for the risk by charging a premium.

Types of Bonds

Although this isn’t an exhaustive list, here are some of the most popular bonds you’ll see in construction credit: payment bond, performance bond, bid bond, prevention bond, discharge bond, contractor’s license bond.

It’s important to note, these bonds all have different functions.

Construction Bonds

Construction projects may involve several types of bonds, each serving a different purpose.

Performance Bond

A performance bond is a bond issued to one party of a contract as a guarantee of the performance of the other party to meet the obligations specified in the contract.

Payment Bond

A payment bond is a surety bond, most often on public projects, issued as assurance of payment to certain parties should the principal of the bond breach their construction contract.

A payment bond is a promise of payment and a performance bond is a promise of performance.

Bid Bond

A bid bond is used during the bid process and is for the protection of the obligee (the party requesting the bids).  A bid bond guarantees the contractor will accept the award of a contract under the terms stated within their bid or the surety will compensate the obligee.

In some states, a bid bond converts to a payment bond. Ohio provides a form of bond that at first is just a bid bond. If the contract is awarded to the principal of that bond, the bond then transforms into a payment and performance bond. HOWEVER, the bond only converts to a payment bond once the contract has been awarded.

Prevention and Discharge Bonds

Although prevention bonds & discharge bonds are not the same, I put them together because they share the same goal: attach security to the bond rather than the property.

Prevention bonds prevent a lien from attaching to the property

Discharge bonds (aka lien dissolution bonds) remove a lien that has already attached to the property

You may be familiar with discharge bonds if you have ever received notification that a lien has been bonded off or bonded around. A bonded off lien does not eliminate your rights; it changes your rights. Instead of pursuing the claim against the property, you would pursue the claim against the bond.

License and Permit Bonds

In some states, such as California, a contractor is required to obtain a bond before they can get a contractor’s license.

According to The Contractors State License Board, “The bond or cashier’s check is filed for the benefit of consumers who may be damaged because of defective construction or other violations of contractors’ state license law, and for employees who have not been paid wages they are owed.”

Essentially, this bond obligates the contractor to adhere to various rules/regulations and helps protect consumers and other businesses mitigate loss if issues such as fraud arise.

Who Is Protected by a Payment Bond?

Generally, parties within two tiers of the principal (such as subcontractors and suppliers) may file a claim against the principal’s bond. Depending on the terms of the bond and the state law, more remote parties may also be protected.

How to File a Surety Bond Claim

The process is similar to filing a mechanic’s lien:

Gather project-related documentation.
Review the payment bond and your contract to confirm your rights.
Serve preliminary notice, if required. (view list of states that require a statutory preliminary notice)
If unpaid, serve your bond claim on all parties in the ladder of supply.
Respond promptly to surety requests for additional documentation.
If the claim does not prompt payment, consider filing suit before the statutory deadline.

Service

Check the statutory requirements to be certain. Typically, bond claims can be served via certified mail and as a best practice, request the return receipt. In cases where you are close to the deadline, consider also serving the claim via overnight service or personal server.

Bond Claim Deadlines

Deadlines vary by state and by bond terms, but often a bond claim must be served within 90 days of last furnishing labor or materials.

Some states specify deadlines by statute.

Others defer to the terms of the bond itself.

Non-statutory bonds (such as those obtained by subcontractors) may also set their own deadlines.

Download this resource for a list of Bond Claim & Suit Deadlines for Public Construction Projects.

Who Should Be Served with a Bond Claim?

Typically, the bond claim must be served on the general contractor and the surety. As a best practice, also send it to the project owner and other parties involved. The more stakeholders are aware of your claim, the greater the pressure to resolve payment quickly.

Limits and Coverage on Filing Bond Claims

Bond claims provide important protection for subcontractors, suppliers, and laborers, but there are limits on who can file and how much coverage is available.

Federal Projects (Miller Act): A payment bond is required when the prime contract exceeds $100,000. Protection extends to first tier subcontractors and suppliers, and to second tier claimants who contract directly with a first-tier subcontractor. More remote tiers are not covered.

State and Local Projects (Little Miller Acts): Each state sets its own bond thresholds and rules. Some states extend protection only to first tier claimants, while others allow second tier or more.

Private Projects: Payment bonds may also be used on private jobs. In these cases, the coverage is determined by the terms of the bond itself, rather than statute.

Coverage Amount: A payment bond generally covers the full contract price between the obligee and the principal. Claims cannot exceed the penal sum of the bond.
Contractor Limitation: Prime contractors cannot file claims against their own bond. The bond exists to protect those further down the ladder of supply.

Because coverage and limits vary depending on the project type, the bond terms, and the governing statute, it is always best to review the bond carefully and confirm your rights before furnishing labor or materials.

Variations in Payment Bond Requirements

Payment bond requirements differ by jurisdiction:

Some states require a payment bond on every public construction project.

Others require a bond only above a specific contract value.

On federal projects under $100,000 but over $25,000, alternative payment protections (such as irrevocable letters of credit or escrow agreements) may be accepted.
In certain circumstances, requirements may be waived.

You Can’t Claim Against Your Own Bond

No, you can’t (and wouldn’t want to) make a claim against your own bond. If you’re the prime contractor on a public project, you’re responsible for ensuring subcontractors and suppliers are paid. Your payment bond exists to protect them, not you.

Bond Coverage on Public vs. Private Projects

On public projects, mechanic’s liens are not permitted because you cannot place a lien on government property. Instead, general contractors are usually required to furnish a payment bond to protect subcontractors, suppliers, and laborers. Bond claims are the remedy for nonpayment on public work.

On private projects, mechanic’s lien rights are typically available, but some contracts also require payment bonds. In these cases, a claimant may have both remedies: a lien against the property and a claim against the payment bond. The availability and scope of coverage depend on the bond terms and state law.

State Laws Vary

Each state has its own “Little Miller Act” and rules on notice, deadlines, and who may claim. Always review the statute and the bond terms.

Contractor Indemnification

General contractors typically indemnify the surety. That means if a bond claim is paid, the surety can recover the amount from the contractor. This creates a strong incentive for contractors to resolve payment disputes before a surety steps in.

What’s the Difference between a Mechanic’s Lien and a Bond Claim?

Mechanic’s liens and bond claims are two separate remedies, and are dependent on the project type. Mechanic’s liens are available on private projects, and bond claims are available on state and federal projects.

Bond Claim: Filed against a payment bond issued by a surety company.

Mechanic’s Lien: Filed against the property itself.

Public Projects: Lien rights are usually prohibited, so bond claims are the remedy.

Private Projects: Both may be available, depending on contract and jurisdiction.

Federal Projects: Bond claim rights are the remedy.

Bond Claim Best Practice Tips

Request a copy of the bond at the time of contract.

Confirm the surety is on the U.S. Treasury’s list of approved sureties.

Review bond terms and applicable statutes before starting work.

Serve preliminary notices as required.
Keep thorough documentation (invoices, delivery tickets, bond copies, correspondence).

Request a Copy of the Bond at Time of Contract

You may find it easiest to contact the project owner to confirm whether a payment bond was required and if one was required, ask to be provided with a copy. Make this request at the beginning of the project when everyone is happy, don’t wait until there are payment issues, because folks are less inclined to share.

As a best practice, include language requesting a copy of a payment bond within your preliminary notice.

Sample Language

To Whom it May Concern,

We are writing in connection with the [project name] project, where we have contracted with [customer name] to furnish labor or materials. Please forward a copy of any payment bond(s) for this project to [email address]. Thank you for your assistance.

Using a Service Provider for Bond Claims

Bond claims can be complex. Each project type, bond form, and jurisdiction may have different rules, deadlines, and notice requirements. A single missed step can jeopardize your right to payment.

Partnering with a trusted service provider like NCS Credit ensures your claim is handled accurately and on time. Our team:

Prepares and serves all required preliminary notices and bond claims

Tracks strict statutory and contractual deadlines

Maintains complete documentation to support your claim

Assists with next steps if enforcement becomes necessary

NCS has decades of experience protecting subcontractors and suppliers on public and private projects nationwide. We make sure you meet every requirement so you can focus on your work, not on paperwork.