When I had my construction company I often had to provide a performance bond for work to be done. This bond guarantees the property owner that my company will complete the job and pay for all materials and labor. If my company did not, the bonding company paid the property owner and went after me for what they had to pay plus costs and interest.

I'm thinking it would be a good thing to be able to require tenants to provide such a bond to guarantee the performance of their lease agreement. Fees for this were about 2 percent of the total contract at the time.

I was also thinking of having tenants sign a note for the total amount of the lease. The note would be reduced by the amount of rent payments each month and reach zero at the end of the lease. If I had to evict, or if they left on their own prior to end of the lease, the unpaid balance of the note would be due and possibly I might be able to collect. If there were multiple tenants or cosigner they would also be on the bond or the note, or both.

Real Estate Law is not the same as some Contract Laws. You could not hold a tenant liable for the full amount due under the lease, for instance, if you re-rented the place. And in NC anyway, Landlord is required to try to mitigate their damages by doing so. You couldn't sit on it un-rented and sue the tenant for the remainder of the lease.

As a licensed contractor and owner/landlord, it is just as important to have a "Payment" and "Performance" Bond. Cost around 3% of the total contract price.

If your contractor fails to pay employee's, material providers and others, even if you paid your contractor, without a "Payment Bond", the others can still sue you and collect.

And the Performance Bond protects that the job will be done as described in the contract.

I think that the State of Michigan would see a "performance bond" as basically an additional security deposit -- and you've very quickly pass that 1.5x maximum for S/D.

- John...