Subdivision Developer Surety Bonds are unique types of contract performance bonds purchased by developers as principals rather than being required by project owners or government agencies. Browse the Best info about Subdivision Developer Surety Bonds.
As with other contract surety bonds, subdivision developer bonds assure municipalities that you will complete the necessary improvements on your property. To qualify for one, an underwriter typically requests proof of financing from banks or lending institutions in order to approve such an application.
What is a Subdivision Bond?
Subdivision developer bonds are performance bonds issued by municipalities to guarantee that landowners/developers fulfill subdivision-specific obligations in construction projects. Municipalities require these bonds in order to authorize specific developers to work on particular projects; requirements vary between cities. Therefore, developers need to be familiar with local laws and regulations prior to seeking out this type of bond.
As with other surety bonds, the principal (the purchaser) is legally obligated to cover any claims brought against them by third parties who were injured by their actions when these claims have been settled or investigated and reimbursed accordingly.
Bonds not only promote accountability, but they also protect obligees by guaranteeing that construction projects will be completed according to specifications and on schedule. Furthermore, this type of bond helps prevent costly mistakes during construction that might arise during installation, such as incomplete or improper installations of improvements.
Subdivision bonds offer an intelligent alternative to letters of credit in that they do not tie up your cash and can help avoid some of its drawbacks, like being held up by municipalities for years. Furthermore, subdivision bonds provide access to more funds while offering unsecured credit – helping ensure your financial stability during a project.
What are the Requirements for a Subdivision Bond?
Subdivision bonds are written to ensure that improvements such as roads, curbs, sidewalks, drainage systems, and utilities will be installed during a construction project. Depending on the bond form selected, it may also include requirements that contractors working on these improvements be paid. A subdivision bond identifies its principal as its property owner/developer while the municipality that requires them acts as its obligee while the bond company that guarantees improvements serves as its surety.
Because subdivision bonds present unique risks, their requirements tend to be stringent compared with those of other construction bonds. Therefore, it is crucial that you work with an expert who can guide you through this process, help you understand its requirements, and present your project in the best light possible to the underwriter.
At a minimum, any qualified surety company will require standard paperwork such as business and personal financial statements, resumes, information about banking relationships, and copies of any trust or partnership agreements. Furthermore, subdivision bonds typically require at least 1.5 the bond amount held in liquid assets held by the principal as security for an underwriter who wants to ensure that the work agreed to is actually completed on schedule.
How Can I Get a Subdivision Bond?
Subdivision Bonds, commonly referred to as Completion, Plat, or Land Improvement Bonds, guarantee that property developers will complete all public improvements associated with subdividing land into subdivisions as required by municipalities requiring such bonds. These improvements typically include roads, sidewalks, water mains, sewers, monuments, and landscaping that, once completed, transfer ownership to those municipalities requiring the bond.
Quality bonding companies prequalify applicants based on factors like credit history and business data to determine whether they meet underwriting criteria for contract surety bonds at competitive rates. This process is known as underwriting.
As opposed to an Irrevocable Letter of Credit (ILOC), Surety Bonds provide their principal with protection from fraudulent or frivolous claims by obligees, as each claim must first go through an exhaustive investigation and resolution process before payment can be issued from the Bond. Furthermore, reputable bonding companies will offer fast turnaround quotes for Subdivision Bonds without charging fees for applying or getting bonded.
Subdivision bonds are an excellent way to ensure your construction project will run according to plan and within its specified timeline, and they’re easier than you may think to get. Contact Viking Bond Service now for a free quote; our staff will work hard to approve you with a fair premium rate—all done promptly and professionally!
How Much Does a Subdivision Bond Cost?
Subdivision bonds are a type of contract surety bond designed to guarantee land improvements agreed to between project developers and governing municipalities. Similar to other contract surety bonds, subdivision bonds offer financial compensation in case construction works don’t meet specific standards.
As with other contracts, subdivision bonds’ prices depend on several variables. These factors include a principal’s credit history and business/personal financial statements, as well as engineer estimates and site plans. Other important aspects to keep in mind include bond form wording, the scope of work covered under the bond, and any warranty periods when pricing out the contract.
Surety companies conduct thorough background and financial reviews when evaluating potential principals. An underwriter will require bank set-aside letters, current financial statements for both the Principal company and owner(s), resumes, information on banking relationships, and copies of past projects to evaluate this individual or business.
Once an underwriter has reviewed all relevant facts and determined that a Principal is acceptable, the surety will provide him or her with a bond quote containing both premiums and indemnity payments (reimbursing Surety for any valid claims paid out by it). A signed contract and payment of premium will result in the issuance of the bond.
