Commercial and contract surety bonds in Georgia can now be submitted with electronic seals and signatures. On June 11th, 2020 Governor Kemp released an executive order clarifying the Empowering a Healthy Georgia executive order. Section VIII- Governments, clarifies that state requirements which previously required raised seals for contract surety bonds or commercial bonds may be electronically sealed and signed if the bond is notarized in accordance to Executive Order 04.09.20.01 and the original bond document be provided within seven business days if requested. This executive order can be found here:
Georgia is one of many government entities adapting to the health risks posed of COVID-19. On April 30th, 2020 the U.S. Department of Defense allowed deviations from the Federal Acquisition Regulation (FAR) and the Defense Federal Acquisition Regulation Supplement (DFARS). The deviation includes allowing for electronic seals and signatures for bond forms submitted for federal construction work – form SF24, SF25, and SF25A. On May 21st, 2020 the SBA issued a notice allowing for electronic signatures to be accepted for bonds and bond documents issued through the Surety Bond Guarantee Program (SBG).
Pennsylvania House Bill 2427, introduced on April 21st, 2020, would require property management companies to offer alternatives to a security deposit, including an installment plan or a deposit alternative in the form of a surety bond. If passed, renters would be able to post a surety bond in lieu of the full amount of the security deposit. Surety bonds can be purchased by paying a non-refundable premium that is a small percentage of the full security deposit amount.
Many states already have security deposit surety bonds in place; Florida, Illinois, Michigan, and North Carolina. Security deposit bonds are also options that private landlords and property managers have the option to utilize. Often times, these are 1% of the security deposit amount. A security deposit surety bond is a guarantee from a surety company that any unpaid rent and or damages to a rental property will be covered, up to a certain amount. Surety bonds do not release a renter from responsibility for unpaid rent or damage to the property. If a bond claim were to occur, the surety company pays the landlord or property owner, but will then pursue the tenant for the payout amount.
Allowing for a security deposit surety bond to be purchased in lieu of paying the traditional full amount of the deposit benefits both the tenant and landlord. Tenants benefit by paying a premium that is a fraction of the full security deposit amount. One of the most common reasons tenants sue landlords is in regards to security deposit disputes. A surety bond would free the tenants of having to pay litigation and attorney costs, as this would be the responsibility of the surety company. Landlords would benefit by freeing themselves of the liability and accounting responsibilities of holding deposit funds. Many states require special escrow accounts to be set up to hold tenant security deposits, and that unreasonably high interest be paid to the tenant on the deposit. Overhead accounting costs for tracking deposit funds would no longer be necessary.
Local, state, and federal stay-at-home orders have a huge impact on the surety industry. Numerous articles have been popping up addressing the effects of COVID-19 on the contract surety industry. What about the commercial and court bonds? Understanding what business industries are deemed essential and the bond requirements can better prepare carriers, agents, and brokers to adapt to the volatile reality that is living through a pandemic. Numerous state and local governments are quickly adapting to electronic licensing procedures, meaning that various license requirements are not exempt during the current pandemic.
On March 28th, the U.S. Department of Homeland Security, Cybersecurity & Infrastructure Security Agency has produced an advisory list of essential critical infrastructures which can be found here. The purpose of this list is to give state and local officials guidance when establishing what constitutes essential infrastructure in hopes of softening the impacts of COVID-19 to the overall health, safety and economy of our nation.
Bonds relevant to these essential infrastructure sectors may include:
On Monday, April 6th, 2020 the Surety & Fidelity Association of America (SFAA) and the National Association of Surety Bond Producers (NASBP) issued a joint Request for Emergency Action to federal, state, and local municipalities to accept the electronic execution and delivery of commercial and contract surety bonds. Many contract surety bonds still require raised seals, which can be a challenge given the current pandemic requiring many in the surety industry to work remotely.
It is imperative to adopt a new standard that allows for the electronic execution of bonds, as many construction projects are infrastructure related to health and safety. The joint request memo urges officials to adopt the following:
With respect to all construction bonds, public procurement officials shall accept all bonds and powers of attorney containing e-signatures and e-corporate seals affixed to each document, and waive the notary requirement.
With respect to all commercial surety bonds, government officials shall accept all bonds and powers of attorney containing e-signatures and e-corporate seals affixed to each document, and waive the notary requirement.
Numerous sureties have quickly adapted to the current pandemic by creating electronic powers of attorney and electronic seals. Software programs have also enabled contractors to submit bid proposals online, with electronic bid bonds. Many license and permit bond requirements have evolved in recent years to allow for electronic execution.
The SFAA and the NASBP have combined their resources to create an immediate request for the adaptation of electronic execution of surety bonds. The joint request has addressed federal and state laws FAR 28.106-1 & GSAR 528.2020 and requested that they are amended to accommodate the current pandemic. If amended this would promote a more conducive and efficient method of bond executions that would be beneficial in the current crisis. This would also mark a significant adaptation in the surety industry. Shipping costs would be eliminated, overhead costs would be reduced and overall efficiency would create a more streamlined process of purchasing bonds.