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Subdivision Bonds

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Subdivision Bonds

Subdivision bonds are also termed as site improvement bonds, completion bonds, performance bonds or plat bonds.  Subdivision bonds are required of property owners or developers by cities, counties or other governmental/public agencies.  Unlike standard performance and payment bonds, subdivision bonds transfer the financial burden of completing certain land improvements from the public entity to the property owner or developer.  Upon completion of such improvements, ownership is transferred to the governing public entity.

Examples of such improvements include, but are not limited to grading, street improvements, paving, curbs, gutters, sidewalks, storm drains, water mains, sewers, landscape, erosion control, and subdivision monumentation.

Subdivision bonds provide financial assurance to the public agency that the land owner or developer will fund and complete the specified improvements through the development of a parcel of land.  In addition, subdivision bonds often include a payment bond guarantee to cover monies owed to laborers, subcontractors and material suppliers.

Public agencies regulate the design and improvements of land within their jurisdiction during the development process.  In order to develop a parcel of property, the property owner or developer must obtain a permit and/or subdivision map, also referred to as a plat, through the governing agency.  In many cases, the installation of public improvements is a condition imposed on a developer in order to proceed with the project.  This process typically requires a subdivision improvements agreement between the property owner or developer and the governing agency.  This agreement would stipulate the public improvements being required, as well as the time in which the land owner/developer has to complete the construction.

The subdivision bond amount is derived from the engineer’s estimate for the costs of the improvements or a percentage thereof.  Not all surety bond Carrier’s write subdivision bonds however, most that do issue them with an initial term of 2 years.  Thereafter, subdivision bonds renew annually until such time that the public entity requiring the bonds provides exoneration/release of the bond obligation to the Surety.

For additional information regarding subdivision bonds, please contact an expert at Pinnacle Surety.