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SUBDIVISION BONDS

WHAT IS A SUBDIVISION BOND?

A Subdivision Bond is also referred to as a Developer Bond, Site Improvement Bond, Land Improvement Bond, Completion Bond, Plat Bond, or Performance Bond. Subdivision Bonds are surety bonds that guarantee a state, city, or county that the principal will complete all public improvements required.

WHY IS A SUBDIVISION BOND REQUIRED?

Subdivision bonds protect the obligee requiring the bond by transferring the risk of a developer’s failure to complete the improvements required. The surety company provides the municipality a guarantee (the surety bond) that they will receive payment for financial damages due to a violation of the subdivision agreement up to a limit specified in the bond

 

HOW MUCH IS A SUBDIVISION BOND?

A Subdivision Bond bond's cost will vary from less than 1% to over 5% of the full contract amount. The cost is very much dependent on the level of assurance the principal can provide. Factors that are considered include credit, financial statements, bond amount, and more. Every state has its own requirements. Please fill out our contact form to start the process and work with a surety bond specialist. 

WHAT IS REQUIRED TO APPLY FOR A SUBDIVISION BOND?

​ Underwriting requirements by bond dollar amount

Subdivision bonds up to $250,000

  • Subdivision Application

  • Copy of obligees's bond form

  • Copy of the partnership or LLC agreement

  • Positive corporate/personal credit review for all owners

Subdivision bonds $250,001 - $500,00

All of the above plus

  • Evidence of financing for the improvements

  • Copy of engineers estimate of cost for improvements

  • Corporate financials of special purpose entity

  • Financial statements of owners

  • Tax return of owners

Subdivision bonds over $500,000

All of the above plus

  • Bank set aside letter or evidence owner(s) has/have funds to support site improvement cost in excess of 2.5x engineer's estimate costs

  • Copy of appraisal/ recent valuation of the property being developed

  • Copy of the construction contract with contractor completing the improvements /copy of any performance and payment bonds.

As is the case with many surety bond products bonds for subdivisions are subjective. If you do not have any of the above information our bond-only specialists are available to discuss the best way to navigate the bonding process. Request the Developers bond kit below and a surety specialist will be in touch!

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