What is a Condominium Association bond ?
Condominium association assessment bonds are a subset of the broader financial guarantee bond category that must be filed with the condominium association responsible for collecting assessments due from individual owners of condominium units.
Condominium association bonds must be issued by insurance carriers admitted in the Commonwealth of Virginia, the only state that currently has a bond requirement. The insurance carrier issuing any surety bond, such as a condominium association bond, will also be referred to as the “surety company” or the “bond company”. Condominium association bonds refer to the condo unit owner as the Principal, the surety bond company as the Obligor and the condominium association as the Obligee.
Why is a Condominium Association bond required?
Condominium unit owners are required to purchase financial guarantee bonds in Virginia pursuant to the Virginia Condominium act to protect a condominium association by transferring to a surety bond company the cost of ensuring the members of the association are compensated for damages resulting from a unit owner failing to provide payment of assessments. The surety company provides the association a guarantee (the surety bond) that the association will receive payment for financial damages due to a violation of the Virginia Condominium Act referenced in the bond form up to a limit specified in the bond (“penal sum” or “bond amount”). Ultimately, condo unit owners are responsible for assessment payments and required by law to reimburse the surety company for any payments made under the bond or face civil action.
How much does a Condominium Association bond cost?
Condominium association bonds generally cost between 2% and 8% of the bond limit.
Example: $10,000 Condominium Association Bond Cost
|Credit Score||Premium Rate||Bond Cost|
|680 or above||2.0%||$200|
Is a Credit Check Required for Condominium Association Bonds?
Credit checks are required for condominium association bonds.