Contract Subdivision Surety Bonds

Anyone purchasing a house in a subdivision expects to have safe roads, curbs, sidewalks, utilities, sewers and water mains around their home and neighborhood.

When a property owner wants to develop their land into a subdivision, those involved, especially the city, county or town want to make sure this work is done properly, is compatible with existing infrastructure, and is completed within a certain time frame. A subdivision surety bond is usually required before the project begins.

Surety Bond and Obligee

A subdivision surety bond is also known as a plat bond, a completion bond, or a performance bond. It can also be called a site improvement bond, though that is often a term used for improvements to existing structures, while a subdivision bond covers new construction.

The bond guarantees that the owner/developer or contractor:

• has the finances available to complete the project
• will properly complete the improvements
• will pay all the workers and suppliers
• will complete the project within a certain time frame
• guarantees the workmanship and materials for at least one year

A surety bond has three entities involved: the obligee, the principal, and the surety. In the case of construction projects, the obligee would be the city,municipality, or county that requires a bond. The principal is the owner/developer that obtains the bond and is responsible for the project, and the surety is the surety company that writes the bond.

A subdivision bond is different from other construction performance bonds in that with subdivision bonds, the developer/owner (principal) of the project pays for the work to be done. With a typical construction performance bond, the obligee (such as a local government) pays for the project. In both cases, the principal obtains the bond to secure the project budget and timeline.

Instead of a surety bond, other acceptable forms of security are an irrevocable letter of credit, certificates of deposit, cash, a certified/cashier's check, or a money order.

Approval of the bond depends on several factors including the developer's experience plus business and personal financial statements.

What Will This Bond Cost?

The premium you pay for a subdivision surety bond depends on factors such as the bond amount, plus the condition of your business and personal financial statements. Contact our Surety Bond Specialists for a free quote that fits your specific situation.

Did You Know?

Completion bonds are also used for film and video game projects.

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