In Seattle, like many cities across the US, it’s hard to drive a few miles without passing a group of new townhomes or luxury apartments. For these projects, developers will likely have to get a Subdivision Bond.
These bonds are classified as contract bonds or commercial bonds depending on the surety company. They are often required to make enhancements to an area. You may hear them referred to as developer bonds, land improvement bonds, site improvements bonds, or plat bonds.
Various phases of development can be guaranteed by a bond, ensuring that the enhancements made to the land or improvements are completed, correctly and timely. This may include adding sidewalks, water, and sewer lines, planting trees, restoring the City’s Right-of-Way, and many other tasks.
The three parties to a subdivision bond are:
- The principal, who owns the land
- The obligee, typically a state, city, or public office that requires the bond to be in place
- And the surety, who is the guarantor
Unlike a performance bond, the principal of a subdivision bond is responsible for funding the project. For a performance and payment bond, the obligee hires the principal and pays for the work. With developer bonds, the obligee doesn’t have any financial responsibility over the project.
Generally, these bonds are written for the developer (owner or title holder of the property), not the contractor doing the work. If the developer hires a contractor to complete the work required by the bond, the contractor posts the bond, and the developer then decides to pause the project and/or not pay the contractor or fires them, that contractor is still on the hook for paying for and completing the bonded work and may not have a way to be released from the bond. For this reason, the Surety companies require that the principal of the bond is the property owner, not the contractor.
Real Estate Development is on the rise. Obligees require subdivision bonds to maintain a safe and cohesive living environment and manage the expectations of a project. The accountability these bonds provide ensures that new development will be completed with the interests of future residents in mind.
The cost of your subdivision bond will depend on a few factors:
- The obligation’s agreement size and terms
- The bond amount
- The experience of the principal and/or the contractors they’re hiring
- The principal’s credit score
- Other financial qualifiers from the principal, such as financial statements
We are always happy to look at your bond requests, and it doesn’t cost anything to find out how much your bond will cost. To get started, please contact us, and send over your subdivision agreement/contract, cost estimate, and any bond forms sent by the obligee. From there, we will ask for owner information, and possibly financial statements. All these items will create a solid submission for the surety company and will help you get your bond faster, and at a great price