Right of Way Bond

What is a Right of Way Bond?

A Right of Way Bond (aka ROW Bond) is a license & permit bond required for contractors before they can start work in a public owned right of way (i.e., public street, highway, roads, etc.).

Who needs a right of way bond?

Right of Way Bond is required in every state and even many municipalities or counties. Generally any contractors that are involved in excavation, grading, sidewalk, encroachment, maintenance or other roadway work projects are required to obtain the right of way bond prior to starting their work.

Why do I need a Right of Way Bond?

Because the bond provides a financial guarantee that a contractor will conduct the project in accordance with local rules and regulations, job specifications and other contractual terms. It will also ensure that the project will be completed, regardless of which contractors will complete it.

How does a right of way bond work?

Each right of way bond is a legal contract binding three parties together.

The principal is the contractor company intending to commence work on a right of way project
The obligee is the state, municipal or local government that requires the bond, i.e., City of Austin, Texas
The surety is the insurance company who issues the bond

If a contractor company performs any fraudulent activities (i.e., substandard workmanship, run away with the money without completing the project), a claim can be filed against the contractor company. If a claim is prove to be valid, the surety will pay for the claim up to the bond amount. Then, the surety will require reimbursement from the contractor company.

How much does a right of way bond cost?

The cost of right of way bond is a fraction of the total bond amount. Therefore, the cost of right of way bond varies, depending on the state and city where you are conducting right of way work.

Generally, the bond premium is 1% of the total bond amount. Therefore, a $10,000 City of Austin Right of Way Bond will cost $100.