Luke Bochansky

(623) 533-3534

Subdivision/Improvement Bonds

Every state, county, city and other local government has land development laws in place, aimed at regulating land use and the growth of subdivisions. For this reason, the above referenced Public Agencies create and enforce codes, statutes and ordinances to regulate the design of the subdivision developments and subsequent improvements of such developments within the Agency's defined jurisdiction. A land developer must take certain steps to gain approval to develop a parcel of land within the jurisdiction of a Public Agency. One of the requirements the Public Agency may impose before issuing a subdivision map is the requirement of the developer to acquire a Subdivision/Improvement Surety Bond.

The local legislation, followed by the public agency, is unique to the jurisdiction. The general purpose and intent, however, remains the same. The purpose of the laws is to regulate and control the design and improvement if a subdivision. The statute facilitates the coordination of planning for the subdivision, taking into consideration things like lot size, development configuration, street patterns and utility easements. Through these statutes, consistency of subdivision design and improvements, including public health works and other environmental considerations, can be assured.

The types of improvements mandated by a Public Agency in a Subdivision/Improvement contract often include any of the following: streets, pavement, grading, curbs, sidewalks, gutters, street lighting, shade trees, surveyor's monuments, water mains, storm sewers, sanitary sewers, culverts or other means of disposing sewerage, drainage structures, erosion and/or sediment control, landscaping and public improvements of open space.

Public Agencies will, in most cases, require a land owner or developer to post financial security in the form of a Subdivision/Improvement surety bond issued by a Surety Company. The bond itself provides financial assurance that a commercial, or residential, land developer will complete the required improvements within a specified timeline. The developer must also stand behind their work and guarantee the quality of both the materials they use and their craftsmanship for a set time period after the completion of the job.

Getting a Bond

To obtain a subdivision/Improvement surety bond a land owner/developer should enlist the help of a Surety Bond Agency to facilitate the bond issuance through a Surety Company. The cost of the Subdivision/Improvement surety bond will depend on a number of factors including, but not limited to, the size of the bond, scope of the work to be completed, financial history of the Development Company and individual(s) associated with the Development Company (Commercial & Individual indemnity).

Commercial Subdivision surety bonds, also referred to as Site Improvement bonds, provide a level of pre-qualification of the property owner or developer that holds the bond. To obtain a surety bond, a land owner, or developer, must go through a Surety Company's underwriting process. The Surety Underwriter will review the financial health, track record and future outlook of the Property owner and/or property developer. The Surety Underwriter will require certain documentation in order to determine whether or not to underwrite the risk. In most cases, this documentation will include, but may not be limited to, an application, business financial statement, personal financial statement of the Principal party to be indemnified, scope of work to be performed & building or development cost estimate.

Once all required full underwriting information has been received and the applicant has been deemed qualified by the Surety Underwriter, the required bond will be issued by the Surety Company and secured by the applicant.

The Subdivision bond will provide the necessary assurances needed by a Public Agency that the property owner/developer will complete any and all mandated improvements in a time and capital efficient manner. The Subdivision Surety bond will also guarantees payment to all contractors that performed the improvement work.

By: Luke Bochansky

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