In this article we will be talking about the requirements needed to obtain a contractor license in the state of New Mexico.
Surety Bond Professionals is a family owned and operated bonding agency with over 30 years of experience. With access to a broad range of surety markets, our expert agents are ready to assist with all of your New Mexico contractor license bond needs.
What Contractor Licenses Are Issued in New Mexico?
New Mexico licenses both general and specialty contractors at the state level, through the Construction Industries and Manufactured Housing Division (CID) of the New Mexico Regulation & Licensing Department. However, license applications are submitted to and processed by PSI, which provides online services to CID and administers the required exams.
If you’re not certain which type of license you need to obtain, you can complete a Classification Determination Request, which is available on the PSI website along with the Contractor License application form.
What Are the Steps in the Licensing Process?
Before you even submit a license application, you’ll need to provide PSI with an Affidavit of Experience bearing the notarized signatures of those attesting to your work experience. PSI must review the affidavit and approve you to register for the specific exams required for the type of license you are seeking.
Once you’ve passed a Business and Law exam and any required trade exams, you’ll need to:
- Complete the Contractor License Application (for which you’ll need a New Mexico Tax ID number)
- Provide evidence of financial responsibility
- Purchase workers’ compensation insurance
- Furnish a New Mexico contractor license bond
- Pay the appropriate application fee for your particular license classification
When all of the requirements have been met, you’ll receive your license from CID.
Why is a Contractor License Bond Required?
A New Mexico contractor license bond is a legally binding contract among these three parties:
- The New Mexico Regulation and Department, which requires the bond and is known as the “obligee.”
- The contractor required to purchase the bond and pay all valid claims is referred to as the “principal.”
- The company or agency guaranteeing the bond is called the “surety.”
In purchasing the required $10,000 bond, the principal is guaranteeing compliance with all applicable building codes. Any code violation that the principal does not remediate can result in a claim being filed against the bond by the obligee or other party who experienced a financial loss as a result of the violation. The principal is legally obligated to pay any claim that the surety finds to be valid.
How Are Contractor License Bond Claims Paid?
While it’s the principal that is legally obligated to pay claims, the surety, as the bond’s guarantor, normally pays it initially and is then repaid by the principal for the resulting debt. The fact that the surety has paid a claim on the principal’s behalf does not erase the principal’s obligation; it merely transforms it into the obligation to repay the surety. Failure to do so can result in the surety pursuing legal action to recover the funds from the principal.
How Much Does a New Mexico Contractor License Bond Cost?
If you need to purchase a New Mexico contractor license bond you’ll pay a premium that is the product of multiplying the $10,000 bond amount by the premium rate the surety sets for you. The surety’s biggest concern is the possibility of not being repaid for claims paid on behalf of the principal. The underwriters will assess that risk based largely on your personal credit score.
If your credit is good, your premium rate could be as low as 1%, which would make the bond’s annual premium only $100. On the other hand, a principal with lesser credit will be assigned a much higher premium rate, possibly as high as 3%, making the annual premium as high as $300.
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