What Is A Contractors Disciplinary Bond?
California Contractors that have violated state law resulting in the revocation of their license may be required to carry a punitive surety bond called a disciplinary bond if they want their license to be reissued or reinstated by the CSLB. This bond is in addition to a contractors license bond and the amount varies depending on the severity of the contractors previous infraction. According to California Business & Professions code 7071.8, the minimum disciplinary bond amount is currently $15,000, but can be up to ten times the amount of the contractors bond under some circumstances.
How Is The Disciplinary Bond Amount Determined?
Ultimately, the California Registrar will decide the penalty amount required for a contractor’s disciplinary bond on a case by case basis, as well as the bond length. As mentioned, this will depend on the severity of the contractors’ previous law violation. The length of a disciplinary bond is a minimum of two years, though longer durations are not uncommon. In addition, the State requires that for as long as a disciplinary bond is on file, the contractor must maintain an active and current license.
How Much Does A Disciplinary Bond Cost?
The cost of a disciplinary bond will vary based on several factors. Generally speaking, smaller bond requirements will be significantly less expensive than larger bonds simply because the issuing surety has less risk on smaller bonds and larger bonds indicate a more severe infraction committed by the contractor and as such, poses a greater financial risk to the surety.
Like other contractor surety bonds, the amount that a contractor will pay for a disciplinary bond depends on the factors mentioned above as well as a contractor’s credit, and in some cases, financials and previous work history among other underwriting guidelines. Disciplinary bond premiums can be as low as a few percent of the bond amount to over 10% in other cases. In general, contractors with challenged credit and/or high disciplinary bond requirements may have more trouble securing a bond than those who don’t.
In lieu of a disciplinary bond, some contractors may choose to file a bond alternative, such as cash or a certificate of deposit with the Contractors State License Board which is permitted by the Code of Civil Procedures, section 995.710. However, with each form of bond alternative, the CSLB will retain the collateral for three years after the end of the bonding period being covered, making this option significantly less attractive for many contractors.