If the purchaser defaults on its settlement obligations, the vendor can call up the bond. CBL Insurance will pay the Vendor the amount of the bond, and then attempt to recover the amount from the purchaser.
This type of bond is particularly useful in situations where the property is still under construction. The vendor is able to secure the sale up-front and the purchaser can avoid having large sums of money tied up for a potentially lengthy period of time. Most deposit bonds are issued for up to 24 months, for up to 10% of the purchase price.
In these instances, CBL Insurance will supply Deposit Bonds to property vendors, developers and project financiers acting on behalf of approved purchasers of commercial, residential or investment property. Generally CBL Insurance would prefer involvement with both project developers and financiers at the pre-construction phase.