Nevada requires contractors to be licensed and provide Nevada Contractor License Bonds. Learn more about these license bonds, including how to easily purchase one online.
Nevada Revised Statutes Chapter 624 spells out the requirements for licensing contractors in the state. According to the Statute, a contractor is:
“any person, except a registered architect or a licensed professional engineer, acting solely in a professional capacity, who in any capacity other than as the employee of another with wages as the sole compensation, undertakes to, offers to undertake to, purports to have the capacity to undertake to, or submits a bid to, or does himself or herself or by or through others, construct, alter, repair, add to, subtract from, improve, move, wreck or demolish any building, highway, road, railroad, excavation or other structure, project, development or improvement, or to do any part thereof, including the erection of scaffolding or other structures or works in connection therewith.”
Nevada Statute requires that a contractor applying for a license show:
“a degree of experience, financial responsibility and such general knowledge of the building, safety, health and lien laws of the State of Nevada and the administrative principles of the contracting business as the Board deems necessary for the safety and protection of the public.”
Further, Section 624.270 requires that licensed contractors provide a Nevada Contractor License Bond or alternative. Licensing of contractors in the state is managed by the Nevada State Contractors Board (The Board).
A Nevada Contractors License Bond is written to the State of Nevada for the benefit of injured parties. It protects parties against the following:
The amount of a Nevada Contractor License Bond is set by the Board. It ranges between One Thousand Dollars ($1,000) and Five Hundred Thousand Dollars ($500,000). The Board sets the amount based on the contractor’s financial responsibility, professional responsibility, and magnitude of operations. The Board may increase or reduce the required bond amount at any time if evidence supporting a change is presented to the Board.
Nevada Contractor License Bonds are easy to obtain. Most can be purchased online in minutes. A simple credit check is all that is needed for most contractors. They can then purchase and print the license bond.
Even those with credit challenges and bankruptcies can usually get Nevada Contractor License Bonds. The contractor may need to provide additional information, but these bonds are obtainable for most parties. Contractors with credit challenges should expect to pay higher rates for these bonds.
Nevada Contractor License Bonds generally cost between 1% – 2% of the required bond amount. However, contractors with credit challenges could pay more. This bond premium is due annually for each year that the license bond remains in place. Some bond companies will provide discounts of up to 30% for contractors who choose to purchase multiple years upfront.
The contractor needing a license is referred to as the principal on the bond. The contractor pays a bond premium to a third-party surety bond company and agrees to indemnify the bond company for any losses that occur. In exchange, the surety bond company provides a financial guarantee to the State of Nevada, who is the obligee. If the contractor violates the conditions of the bond, the state can collect from the surety bond company. It will then be the surety bond company’s responsibility to try and get reimbursed from the contractor. This process protects the public by making an easier process to get claims paid.
Any affected party can make a claim against a Nevada Contractor License Bond in court or competent jurisdiction. The surety bond company must notify the Board within 30 days of receiving notice. The Board shall then provide the claimant with information on the License Bond such as if a bond or alternative is in place and the amount of the bond or alternative. The surety bond company must also provide prompt notice to the Board of any payments made against the license bond.
Claims for unpaid labor take priority over all other claims. All other claimants other than labor have equal priority. The Board may not collect against the Contractor License Bond for claims made against them. The period for filing claims is two (2) years from the date the party was damaged. After that, a claim cannot be made against the Nevada Contractor License Bond.
A Nevada Contractor License Bond must be continuous in nature and in place for each year that the contractor is licensed in the state. However, the most the bond company is required to pay is the face amount, regardless of how many years the bond has been in place.
For example, a surety bond company with a $10,000 Nevada Contractors License Bond that has been in place for three (3) years must only pay $10,000. This is regardless of the number or dollar amount of claims filed against the bond. However, paying against a license bond does not typically remove a contractor from additional legal liability.
After a period of 5 consecutive years of maintaining a Nevada Contractor License Bond, a contractor may petition the Board to have the requirement removed. If the Board grants the removal, it may still require the contractor to post another Contractor License Bond at any time.
A surety bond company may cancel a Nevada Contractor License Bond anytime by providing sixty (60) days of notice to the Board. The cancellation must be received by certified mail in the Board’s office. The surety will continue to be liable for any claims that occurred while the license bond was in place including the 60-day notice period.
Contractors that have their license bond canceled will need to replace the bond before the notice period ends or they will have their license suspended.
In lieu of a Nevada Contractor License Bond, a contractor may choose to post a cash deposit. There are reasons a contractor may not want to do this. A cash deposit can significantly tie up a contractor’s resources that could be used to fund operations. Additionally, when a cash deposit is used, it must be held for two (2) years after the contractor no longer has a license or last performed work. This can tie up a contractor’s cash even after they are no longer performing work. Additional comparisons about surety bonds versus cash can be read here.
Nevada Contractor License Bonds serve a valuable purpose in protecting the public and workers on construction projects. However, the limits on the license bond are often too small to fully protect parties on a construction project. Owners and workers looking for protection may still want other protection in the form of performance bonds or payments bonds.
Nevada contractors may also need other bonds in addition to Nevada Contractor License Bonds. Many municipalities have their own bond requirements such as additional license bonds, Right of Way Bonds and others. Contractors performing commercial work may also be required to post Contract Bonds.
Nevada contractors who build and install residential pools or spas are subject to NRS 624.276. This statute requires an additional bond in addition to the regular Nevada Contractor License Bond. They must also provide a Residential Pool and Spa Bond for the Protection of Consumers. In certain cases, they may also be required to post a Performance Bond for 50% of the project amount, and/or a payment bond for 50% of the project amount.
Nevada Contractor License Bonds are necessary to become a licensed contractor in Nevada. These bonds protect the public by giving them financial recourse if they are damaged by a contractor. More can be learned about surety bonds by visiting our FAQ page.
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