Maintenance Bonds

What is a maintenance bond?

A maintenance bond (also called a defects liability bond) guarantees the contractor's obligation to return and rectify any defects in workmanship or materials that emerge during the defects liability period specified in the contract. This period typically runs for 12 months after practical completion, though some contracts specify longer periods.

Maintenance bonds usually cover 2.5–5% of the original contract value — roughly half the face value of the performance bond they replace.

Why maintenance bonds matter for cash flow

At practical completion, the contractor's performance bond needs to either remain in place for the duration of the defects liability period or be replaced with a maintenance bond. Without a maintenance bond, one of two things happens — the full performance bond stays active (tying up facility capacity that could be used for new projects) or cash retentions are withheld until the defects period expires.

A maintenance bond solves both problems. It replaces the performance bond, immediately freeing up that capacity within your surety facility. And it substitutes for cash retentions during the defects period, keeping your cash flow intact.

How maintenance bonds work in practice

When a project reaches practical completion, your broker arranges the conversion from performance bond to maintenance bond. The new bond is issued for the reduced face value (typically half the original performance bond) and remains in place until the defects liability period expires and the principal confirms there are no outstanding defects.

Once the defects period ends, the bond is released — freeing up the remaining capacity within your surety facility.

Why active bond management matters

Many contractors leave performance bonds in place well beyond practical completion because nobody follows up on the conversion to maintenance bonds or the eventual release. This ties up facility capacity unnecessarily and can constrain your ability to tender for new work.

BCS proactively manages the conversion from performance bonds to maintenance bonds at practical completion, and follows up on bond releases once the defects liability period expires. This ongoing facility management ensures your bonding capacity is always available for new projects.

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