What Is a Lease Surety Bond?
Think of it as being similar to performance or completion bonds that are obtained in the construction context. These are hybrid insurance products, which are alternatively called “surety bonds,” “indemnity bonds,” “lease bonds,” or “lease surety bonds,” and there are now a growing number of carriers in the market who issue this product. Three different parties appear in the text of the surety bond. First, there is the insurance company that issues the bond, typically identified as the “surety”; second is the tenant, labeled the “principal”; and third is the landlord for whose benefit the bond is issued, called the “obligee” or “beneficiary.” The surety bond operates legally as a contractual promise on the part of the surety to perform for the tenant under the lease, should the tenant fail to perform. Just like a letter of credit, or even a regular insurance policy, the surety bond has a term, which is typically one year, but on rare occasions can be as long as five years. (Since most l
