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School District Building not Completed – City Failed to Require Performance Bond




A Springfield, MA School District sold a vacant building to developer for $1 in 2011, with the agreement that the building would be restored and converted to apartment buildings within 18 months.  The developer, 195 State Street Real Estate LLC, has not come close to completing the work and the District filed a breach of contract complaint against the developer.  For the entire article, click here.

The City’s Councilor, Timothy Rooke, said that a performance bond was suggested at the time of the sale to guarantee completion.  He was quoted in the article as saying “Shame on us (the city) for not asking for the performance bond.”

A performance bond is often required by public agencies to ensure completion of given projects, especially when public interest, improvements, or dollars are at stake.  In this case, the property was in a prime location in an important area of the city, and city and District officials felt like the apartment buildings needed to be completed to help restore the area.  A performance bond would have helped guaranty that completion.

Developments are speculative, so qualifying for a performance bond is difficult for many. Financing would have needed to be in place, which in this case it was not.  If the District had required a performance bond and the developer failed to obtain, it would have been a red flag to District that everything was not finalized on the developer’s end.




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