‘A surety bond or surety is a promise by a surety or guarantor to pay one party (the obligee) a certain amount if a second party (the principal) fails to meet some obligation, such as fulfilling the terms of a contract. The surety bond protects the obligee against losses resulting from the principal’s failure to meet the obligation.’
Section 12 of the act allows for an adjoining owner to require security for expenses which protects an adjoining owner should the Building Owner become insolvent or abandon the works. Security used to placed in an escrow account, however PIB Insurance brokers have come to the fore and now provide an unique security for expenses insurance. The most important assistance to the building owner is that large sums of money are no longer tied up in an escrow account and the cashflow of the project is not affected.