Minnesota Housing Finance Agency

PAYMENT BOND

Effective as of the _____ day of ____________, 20__ (the “Effective Date”), _________________________________________, a ______________________, as Contractor (“Contractor”), and ___________________________________________________, a _________________________, as Surety ("Surety"), are held and firmly bound in the amount of $__________ to ______________________________________________, a Minnesota ____________________, [address] (“Owner-Obligee”), and Minnesota Housing Finance Agency, 400 Wabasha Street North, Suite 400, St. Paul, MN, 55102-1109 (“Lender-Obligee;” Owner-Obligee and Lender-Obligee are collectively referred to as “Obligees”), as their respective interests may appear in the Construction Loan Agreement dated as of _____________, 20__ (the “Construction Loan Agreement”). Contractor and Surety bind themselves, their heirs, executors, administrators, successors, and assigns, jointly and severally.  

RECITALS

A.	Contractor and Owner-Obligee have entered into a Construction Contract   dated ______________, 20___ (the “Contract”), which is incorporated into this Payment Bond (this “Bond”) by reference. The Contract requires approval of Lender-Obligee for the construction of a development designated as ____________________________________ (the “Development”).

B.	Pursuant to the Construction Loan Agreement, which is incorporated into this Bond by reference, Lender-Obligee has agreed to make a loan to Owner-Obligee secured by a mortgage on the Development, and Owner-Obligee will use the proceeds of that loan to make payments to Contractor under the Contract. Obligees want to ensure that Contractor promptly pays for all labor and materials furnished in the performance of the work provided for in the Contract (the “Work”).

Contractor and Surety agree as follows:

1.	If Contractor promptly pays all Claimants (as defined in paragraph 2(a) below) for all labor and material furnished in the performance of the Work, then this Bond will be void; otherwise, this Bond will remain in full force and effect.  

2.	Any Claimant (as defined in paragraph 2(a) below) will have a direct right of action under this Bond against Surety, subject to the following:

(a)	“Claimant” includes any person that has a direct contract with Contractor or with a subcontractor of Contractor, has furnished labor, material, or both, in the performance of the Work and has not been paid in full for the labor and/or material furnished.  Labor and material include, but are not limited to, that part of water, gas, power, light, heat, oil, gasoline, telephone service, or rental of equipment directly applicable to the performance of the Work.

(b)	Every Claimant that has not been paid in full within 120 days after the date on which Claimant last performed work or furnished materials may sue pursuant to this Bond in the name of Claimant, prosecute the suit to final judgment for the amount that is due Claimant and execute that judgment. Obligees will not be liable for the payment of any costs or expenses of any suit.

(c)	Any changes in the amount Owner-Obligee must pay Contractor pursuant to the Contract that, when added to prior changes or alterations, cause the total amount of all those changes to exceed 10% of the original amount payable under the Contract require the prior written approval of Surety. Except for that condition,

(i)	any alterations that may be made to the terms of the Contract or the Construction Loan Agreement, the Work, or the time Obligees give Contractor to perform the Work, 

(ii)	any forbearance on the part of either the Obligees or Contractor to the Contract, or 

(iii) 	any forbearance on the part of either the Obligees or Contractor to the other of those persons,

will not release Surety or Contractor of any obligations of this Bond. Surety waives notice of any of those alterations, extensions of time, or forbearance.

(d)	No Claimant may commence a suit or action for payment

(i)	unless Claimant gives written notice of the claim to Contractor and both Obligees within the period of time specified in paragraph 2 or files a mechanic's lien in accordance with the Mechanic's Lien Act of Minnesota,

(ii)	if more than two years has passed since the date on which Contractor ceases the Work, and

(iii)	other than in a district court of Minnesota of competent jurisdiction in and for the county in which the Development, or any part thereof, is located, or in the United States District Court for the District in which the Development, or any part thereof, is located.

The notice of claim required by clause (i) must state with substantial accuracy the amount claimed and the name of the person to whom materials were furnished or for whom Claimant performed the work or labor. Claimant must serve the notice of claim by mailing it by registered or certified mail, postage prepaid, and addressed to Contractor and Obligees at the address set forth for that party in this Bond, or by serving it in any manner in which a summons or subpoena may be served under Minnesota law at the location of the Development, except that service need not be made by a public officer. For the purpose of clause (i), filing a mechanic's lien in accordance with the Mechanic's Lien Act of Minnesota is sufficient notice.

	3.	The amount of this Bond will be reduced by the amount of any payments made in good faith hereunder, including the payment by Surety of liens which any Claimant files of record on account of any labor or material furnished under the Contract, whether or not Claimant presents a claim for the amount of the lien under and against this Bond.

	4.	Contractor and Surety will not be liable under this Bond to Obligees, or either of them, unless Obligees, or either of them, makes payments to Contractor prior to default and to Surety after default in accordance with the terms of the Contract and the Construction Loan Agreement, and performs all other obligations required under the Contract and the Construction Loan Agreement at the time and in the manner set forth in those agreements.

IN WITNESS WHEREOF, the authorized officers of each of Contractor and Surety have executed this Bond as of the Effective Date*.
*(Not earlier than the Contract date).

													

						By:							
						 	(Contractor)
Its: 							

[ADDRESS]

													

						By:							
						 	(Surety)
Its: 							

[ADDRESS]

STATE OF MINNESOTA	)
				) ss.
COUNTY OF			)

	The foregoing instrument was acknowledged before me this _____ day of __________ 20__, by ___________________________, the ______________________________________ of 	______________________________________, a Minnesota 	_________________, on behalf of said _____________________.

						_______________________________________
								Notary Public

STATE OF MINNESOTA	)
				) ss.
COUNTY OF			)

	The foregoing instrument was acknowledged before me this _____ day of __________ 20__, by ___________________________, the ______________________________________ of 	______________________________________, a Minnesota 	_________________, on behalf of said _____________________.

						_______________________________________
								Notary Public