All About Oregon CCB Bond
In the hustle and bustle of the construction industry, there are boundless opportunities for success and profit but also pitfalls and risk. The Oregon Construction Contractors Board (CCB) has established the Oregon CCB Bond as a way to ensure that contractors are complying with state regulations as well as protecting the consumers that hire them. Much like a consumer may require a security deposit from a tenant, requiring a license and bond from a contractor allows you to protect yourself from loss in the event that you have issues with the work performed by the contractor.
These required guarantees offer peace of mind to the property owners as well as the Oregon CCB that licensed contractors are held to a higher standard and are required to repay consumers when they cause a non-conforming line on a job or completely fail to follow through. In short, the Oregon CCB bond protects all the parties such that contractors are encouraged to comply and employers, property owners and the public are assured that they can depend upon the CCB to do their due diligence in investigating any claim.
While the Oregon CCB Bond is primarily for the protection of the consumer , it also acts as a benefit for contractors. Should a claim be made by a consumer, the CCB bond allows the investigating board to recover costs and damages from the contractor. If a consumer would have to file a civil suit against a contractor in order to be made whole, it would be much more costly and less likely that they would be able to recover. The bond allows the Oregon CCB to enact its administrative procedures and prosecute the claim against the bondsman allowing them to quickly and efficiently receive compensation. The costs of such claims are much more efficient for the consumer and a lower bound of available remedies encourages them to settle a claim rather than litigate.
It is important to remember that in order for the Oregon CCB Board to enforce the bond, it must be obtained prior to the damages occurring. For example, if a contractor is unlicensed or missing the bond, then a license application will be investigated and if a contractor does not win the contract award, they will not be able to collect on a bond. Challenges must be brought during the contract award process.
Oregon CCB Bonds Explained: Who Needs One?
Several types of contractors, in a variety of industries and for a range of project scopes, are required to obtain a CCB bond in Oregon. For example, most residential general contractors must obtain a CCB bond. So do most residential specialty contractors. Additionally, all commercial general contractors must obtain one.
For residential general contractors, a CCB bond is required when those contractors undertake work for projects including the construction of single family residential units with up to four units, the remodeling of single family residential units with up to four units, and the construction or remodeling of single family residences on land owned by the contractor or one of the contractor’s partners, officers, directors, members or managers.
A CCB bond is not required for projects that involve the construction of or remodeling of a single family residence on land owned by the homeowner. In addition, a CCB bond is not required for the construction of model homes, whether single-family or multi-family, so long as those homes are not sold or leased. A CCB bond also is not required for certain forms of construction performed only on work sites other than homes, single-family residences, duplexes, triplexes or four-plexes. Those forms of construction include, among other things:
For purposes of requiring a CCB bond, all nonprofit housing and affordable housing development projects are deemed to be residential structures.
Oregon CCB Bond Amounts and Cost Analysis
The bond amounts required by Oregon’s Construction Contractors Board (CCB) are dependent upon the number of employees you have. If you are working as a sole proprietor and sub-contracting work to others, your bond is $20,000. If you have 1-2 employees, your bond is $50,000. And if you have more than two employees or are a corporation, your bond is $100,000. It does not matter whether or not you are also an employee of your business-if you have subcontractors you are required to carry the higher bond amount.
Although the above amounts are standard, the CCB will sometimes require an additional $10,000 for unlicensed subcontractor bonds. For example, if you are a paving contractor and have workers that install sidewalks, you’ll need to carry an additional $10,000 in bond coverage for the sidewalkers-even if that work is being performed by someone else as an unlicensed subcontractor.
In considering the cost implication of these bond amounts, it is best to remember that the total amount purchased must be broken down into two components. The first section is the premium which ranges from $100.00 up to $305.00-though this can vary. The second section is the security deposit funds. Remember, when you choose a grandfathered commercial surety bond, you pay a slightly higher premium but the bonding company allows you to keep a much larger portion of the bond as a returnable security deposit.
Oregon CCB Bonds: How to Get One
The process of obtaining the Oregon CCB Bond begins with a simple application that must be completed by the bond applicant. The surety that underwrites the bond then reviews the application and issues an approval/decline notice, along with a rate quote. If the rate quote is acceptable to the bond applicant, they can tend to a few pieces of required documentation and the initial payment due, and once all is submitted in good order, the surety will issue the bond.
The surety’s review of the bond application is for underwriting purposes, and if the bond applicant is a corporation or LLC, the review must include a guarantee by all owners (of the corporation) If the bond applicant is an individual, there is no need to include a Personal Guarantee with the application package, but it is typically required of corporate and LLC owners. Once submitted, the documentation review can take anywhere from 1 to 4 business days to complete, after which the surety will issue a rate quote. If the bond is approved, the surety needs the following items to issue the actual Oregon CCB Bond in the physical form, that is required by the State of Oregon: It is important to note that the Oregon CCB Bond must be issued on our proprietary wording, and not the CCB’s. The State of Oregon CCB does not allow copies of the bond to be issued to the bond principal or agent. All bonds are issued electronically via email as an immediate PDF file, and hard (wet) copies are sent via U.S. Mail as well. Physical copies are often required for underwriting purposes by the CCB, especially for any bond changes that are filed. Once issued, the bond is filed with the CCB, and they will keep it on file until such time as you file a bond claim or let the Oregon CCB Bond expire. The bond is in force for two years, and the renewal process begins 90 days prior to the current bond expiring.
What Happens if You Don’t Have an Oregon CCB Bond?
Failure to secure the required Oregon CCB bond can expose a contractor to a wide range of potential liabilities that may have been avoided by having the bond in place. Here is a brief, non-exhaustive list of the legal and financial risks posed to contractors who fail to secure the required Oregon CCB bond:
- (1) Failure to Obtain a CCB Number means you are not a registered contractor and are Not Permitted to Legally Work on any construction project: According to ORS 701.011(4)(c), an individual is not permitted to act as a contractor without obtaining a CCB number from the Oregon Construction Contractors Board ("Board") in accordance with ORS 701.051. This is to say that even if you fail to obtain a CCB bond, if you do not have a CCB number, you are not legally permitted to act as a contractor and are not permitted to legally perform work on any construction project.
- (2) Penalties assessed against unregistered contractors: ORS 701.992 provides that "without restricting any other penalty, a person who violates ORS 701.011(4)(c) shall: (a) Forfeit by civil penalty $200 for each day the violation continues to exist. The total civil penalties assessed against the person total $5,000, and not exceed 3 times the value of any contract." In addition, The Oregon Construction Contractor’s Board may assess civil penalties for a violation of any provision of ORS Chapter 701 (Construction Contractors Law).
- (3) An Unbonded Contractor may be Unable to Secure Payment or Performance Collateral from its Contractor: If a contractor fails to secure a bond as required by ORS 701.122, the contractor’s surety will most likely refuse to provide performance or payment bonds on behalf of the contractor . Without performance and payment bonds, many general contractors require their subcontractors to provide payment and performance collateral in the form of cash, a consenting property lien or letter of credit. Some general contractors also require subcontractors lacking bonding capacity to offset the increased risk of default by lowering contract value, securing subcontractor claims through retention and/or increasing retention amounts.
- (4) Failure to secure a CCB bond may result in increased lawsuits, litigation and arbitration: In the construction industry, alternative dispute resolution ("ADR") is a common method used to resolve payment and performance obligations. However, whether it is litigation or ADR, there is a pre-litigation cost to resolving your disputes. Failure to secure a bond required by ORS 701.122 may mean that you will be forced into using the courts to pursue your claims. Sometimes, it is necessary to file a lien against the owners property to secure a defense to further claims against an owner but before a contractor can record a lien it is required to submit a valid Notice of Compliance with the Board pursuant to ORS 701.155 and all claims must be filed with the Board for review before an owner is liable for any amounts owed. Therefore, a contractor is required to deal with the surety, the complaining subcontractor and the Board to resolve its claims against the Owner. For these reasons, I am of the opinion that failure to bond a Construction Project could cost a contractor anywhere from $5,000 to $100,000 depending on the amount of disputes and the number of parties involved to resolve the dispute.
Oregon CCB Bonds: Renewal and Maintenance
If a CCB bond is allowed to expire without a surety bond renewal, and you have not put in place a new bond in the appropriate amount, the bond and renewal expiration will be reported to the Oregon CCB and your license will be subject to immediate suspension and/or revocation.
It is an absolute requirement that a construction contractors license be renewed every two years. It is also essential to ensure a current bond is in place at this time, although the renewal date is not the only date to look at for potential bond renewal. A bond with an initial term of four years will not only have a renewal due at year four, but additional renewals at years 8, 12, etc. The statutory provision requiring a bond to be maintained in the amount of $20,000.00 includes an additional provision stating:
"unless the surety on the bond is required to remain on file during the period of a license suspension or revocation. The amount of the bond must be in effect for the entire period that the license is in effect." ORS 701.088(3)
In short, even if your bond carries a term of multiple years, you must remember to renew the bond for those years to avoid a lapse.
FAQs
How much does the Oregon CCB Bond Cost?
There are several Oregon CCB Bonds, each contingent upon the contractors license and which type of activity the contractor will be performing. For example, the cost for a $10,000 Oregon CCB Bond is $15; while the cost for a $20,000 Bond is $30. Keep in mind though that your overall rates are not determined by your Oregon CCB Bond.
How do I apply for an Oregon CCB Bond?
To apply for an Oregon CCB Bond you generally answer a few questions about the person or entity requiring the bond and the coverage amount required. After you successfully place your order, the surety company issuing the bond will look at your credit rating to determine what rates they can offer you. Some surety companies may require the applicant to submit financial statements as well. Once you’ve submitted your application, your bind is sent to you and the principal , typically via email.
How long does it take to obtain an Oregon CCB Bond?
Generally, Oregon Construction Bonds are issued quickly as long as the information given to the agent is correct and full. A simple application can usually be filled out in a few minutes, and the information used to submit it automatically for binding with several sureties.
What happens if I don’t renew my CCB bond?
An Oregon CCB Bond is an agreement between three parties: the Principal, the Surety and the Obligee. This bond guarantees that the Principal has the financial security to build; it also guarantees that the surety will pay the obligees any costs if the principal doesn’t follow through with their obligations. These bonds must be renewed periodically such as annually in order to maintain their value and validity. If you don’t renew your bond, the surety is legally able to proceed with enforcement action by canceling and executing the bond.