Date Published: March 19, 2024

There are a few reasons why subdivision improvement bonds can be more difficult to obtain compared to other types of surety bonds:

  1. Higher risk for the surety: Unlike standard performance bonds that guarantee a specific project’s completion, subdivision bonds cover a wider range of public improvements. These can include roads, sidewalks, utilities,Why Subdivision Bonds Can be Difficult to Obtain and drainage systems. The surety takes on a bigger risk if the project fails or encounters unforeseen complications.
  2. Project complexity: Subdivision developments often involve multiple phases and can take years to complete. This makes it harder for the surety to accurately assess the project timeline, budget, and potential risks.
  3. Financial strength of the developer: Surety companies heavily weigh the financial health and track record of the developer applying for the bond. A developer with limited experience or a shaky financial history will find it more challenging to secure a bond.
  4. Subdivisions are self funded, meaning there is not a third part (municipality)paying for the project.
  5. Local regulations: Requirements for subdivision bonds can vary depending on the location and the specific municipality. This adds another layer of complexity for both the developer and the surety company.

Here are some additional points to consider:

  • Not impossible to obtain: While obtaining a subdivision bond requires more scrutiny, it’s not impossible. Developers with a strong track record, a detailed project plan, and secure financing are more likely to be approved.
  • Working with a surety bond specialist: An experienced broker or agent like Surety1 can help developers navigate the process, understand specific requirements, and present the project in the most favorable light to the surety company.

By understanding the challenges and taking proactive steps, developers can increase their chances of securing a subdivision improvement bond and move their project forward. See our blog:

What is a Subdivision bond?

A subdivision bond, also known as a plat bond, development bond, or improvement bond, is a type of surety bond required by some local governments before development on a subdivision project can begin. It acts as a financial guarantee for the municipality overseeing the project. Here’s a breakdown of how it works:

  • Who Needs It:
    • Property owners who are subdividing a residential or commercial property into smaller lots.
  • What a subdivision bond guarantees:
    • Completion of public infrastructure related to the subdivision, such as:
      • Streets
      • Sidewalks
      • Curbs
      • Gutters
      • Sewers
      • Water mains
      • Drainage ditches
  • Why It’s Required:
    • Protects the municipality from financial burden if the developer fails to complete the necessary infrastructure improvements.
    • Ensures the development meets specific standards and provides essential services to future residents.
    • Allows developers to sell lots before all infrastructure is complete.

Surety1.com is a service of AssuredPartners one of the largest and fastest growing insurance agencies in the nation. Representing over a dozen surety bond companies, Surety1.com is the premier provider of surety bonds for the construction industry, nationwide, since 2003.

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