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Subdivision Surety Bond
What is a Subdivision Bond?
A Subdivision Bond is a surety bond that guarantees a developer will complete a subdivision and the associated public improvements at the developer’s expense and in accordance with approved development proposals and permits. Local municipalities, such as city and county governments, require developers and property owners to post subdivision bonds in order to assure full and complete development of public land and utilities within a subdivision. Public land and utilities include street improvements, grading, paving, gutters, curbs, sidewalks, water mains, storm drains, sewers, erosion control, subdivision monuments, landscaping, and other underground utilities including natural gas lines and electrical work.
A Subdivision Surety Bond is a type of contract bond that includes a performance bond, a payment bond, and a maintenance bond. The performance bond guarantees the work is completed on-time and according to the approved proposal or permit. The payment bond guarantees that all subcontractors, laborers, and suppliers involved in the project will be paid. The maintenance bond guarantees the Principal (developer) will maintain the improvements for at least one (1) year for any defective workmanship and/or materials.
Subdivision Surety Bonds are individually underwritten so the cost can vary and depends on the size and scope of the project as well as the developer’s size, experience, and financial position. Typically, well-qualified applicants are charged as low as 1-3% of the bond amount.
Due to the associated risk from the perspective of the bonding company, Subdivision Bonds can be very carefully underwritten. Part of the cost of this bond will be the time and effort needed to provide the documentation and information the bonding company will need. Some of this information will include corporate financials, personal financials, credit reports, industry experience, project details, and sources of funding. The larger the project, the more details and information that will be required. Here is a comprehensive list of items needed to establish a full surety relationship.
Subdivision Surety Bonds are oftentimes required by local law or ordinance. The bond must be posted before a developer can begin work on a subdivision. The bond guarantees the developer will finance the improvements to public property and utilities associated with the development of a subdivision. The bond protects the public from losing any money in the case of the developer defaulting during the project or the developer not performing according to the approved permits and local construction/building code.
Local municipalities and governments require developers and landowners to post the subdivision surety bonds when they obtain building permits or file a lot map. The Obligee on the bond is the municipality (city, county, township, etc.) requiring the bond. You, the developer/landowner, are the Principal on the bond. Unlike other bond types, subdivision bonds and their associated projects are financed by the Principal. When the project is completed, the ownership of the improvements is transferred to the Obligee.
For example, if a developer intends to build a subdivision in Hillsborough County, Florida. They would need to file the necessary plans and paperwork with the county as well as provide a Subdivision Bond to the Hillsborough County Board of County Commissioners (BOCC). The Hillsborough County BOCC would be the Obligee on the surety bond.
Contact The ProSure Group! As surety bond experts in business since 1993, The ProSure Group has issued hundreds of Subdivision Bonds and has partnerships with more than 30 different surety companies. This ensures that we get you the best, most competitive pricing and terms available in the marketplace. You just need to complete our simple application and one of our specialists will quickly contact you.
