Subdivision Bonds

Subdivision bonds, also known as ‘site improvement’, ‘plat’, or ‘subdivision improvement’ bonds provide a level of protection to a local government, guaranteeing that the owner/developer will complete improvements which will become part of the public domain (i.e., gutters, sidewalks, curbs, etc.) . The key difference between subdivision bonds from regular contract performance bonds is that the developer must pay the cost of building the bonded improvements rather than the public agency.

In addition to the typical underwriting criteria for contract performance bonding (the three ‘C’s), this particular obligation requires further support. Just as important are:

Scope of Work – details on the work or scope of the improvements to be installed. This information will normally be spelled out in the subdivision/improvement agreement. When will the work start and be completed? What is the estimated cost of the improvements and the amount of the bonds? Engineer worksheets detail this.

Cost of Work – developer’s estimate of cost to complete. Firm bids or signed contracts from trade contractors to are important. Often, we would also like to see bonding from the contractors running to the developer.

Funding Source – The MOST important underwriting concern is how the work will be funded? Escalation in the cost to complete the work is VERY SERIOUS. Underwriting experience has demonstrated that improvements not completed within the original time frame and the ultimate cost months or years later can be much greater. Funds should be set aside (“set aside” is a KEY WORD) so that they can only be used to pay for the required subdivision improvements.

Subdivision Bond Application Materials

Please devote some time and effort into organizing and submitting your application. Incomplete performance bond submissions do not help you. Informal financial statements (compilations) are only acceptable for very small bond requests. Tax returns are NOT financial statements and are never acceptable in lieu of the same. Clear, professionally prepared contract surety applications GET ATTENTION