Subdivision Bond Application

Subdivision defined (As it relates to bonding)

A subdivision bond is a common state requirement for developers working on government-required public construction to a subdivision plat. The subdivision risk is a guarantee to the state, city, county or public utility district that a principal involved in the construction of a subdivision or the improvement of land will finance and complete any mandatory public improvements.

Public improvements may include:

Streets
Utilities
Landscaping
Storm drains
Sidewalks
Curbs
Gutters

This is also considered “off-site improvement” which will become the property of the public entity once the work is completed and the principal/bond is released by the obligee.

Why is the bond needed?

With subdivision bonds, the owner of the project (typically the land owner) will provide the bond to the public agency to guarantee the improvements that will benefit the public but are paid for by the owner/developer. The owner/developer is then required to pay the cost of building the bonded improvements instead of the public agency.

If a separate hired contractor agrees to post the subdivision bond on behalf of the owner, the contractor would normally have the right to stop work if the owner does not pay him. However, if a contractor files the bond in favor of the public agency, the contractor is then required to complete the improvements and pay the bill regardless of whether the owner/developer has paid the contractor for the work.

Since public improvement is a condition imposed on a land owner/developer in order to move forward or complete a project, the owner is then required to furnish acceptable security to guarantee completion and payment of the work.

Who is required to secure the bond:

Typically the Land Owner (person(s) or entity with the legal right to the land, not the hired party/contractor to develop, build, etc.
- This could be individual(s) or a company, or a contractor if the land is in the company’s name and not an individual. In that instance, they would be acting as a developer and not just a contractor.
A hired contractor/developer can agree to post the bond and take all the risk away from the land owner.

Underwriting Submission Requirements:

Completed subdivision application
Copy of the (Subdivision) Agreement/Permit with the obligee
Architect/Engineer’s estimate of the project
Signed Indemnity Agreement or consumer authorization for credit
Company Financials if the bonded principal is an entity
- Balance sheet
- Income statement
- FYE and Interims if available
Personal Financial Statements of all land owners (10% or greater ownership if in the name of a company)
Bond Form from the obligee
LLC Operating Agreement – if the company is an LLC. (This is to verify ownership).

The surety will be looking for solid credit and financials of the owners of the project/land etc. The surety also requires the indemnity agreement signed in order to begin the underwriting process to pull credit as well. Two signatures from the principal (corporate and personal) and spousal indemnity are required in order to bind coverage.

Subdivision bond online application

Please complete and submit our online subdivision bond application below for your free quote. If you have questions about the bond or our application, please contact us at [email protected].