Subdivision Bond

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What Is A Subdivision Bond?

A subdivision bond is a type of construction surety bond. It serves as a developer’s guarantee that public improvements will be completed to an acceptable quality, in accordance with all applicable regulations, and within the required timeframe. The terms of the bond may also guarantee that the suppliers, contractors, subcontractors, and workers employed on the project will be paid by the developer.

When constructing large offices or multiple properties, site developers have building regulations, bylaws, and rulings that they must follow. These guidelines outline what is to be obeyed during the project. If they are not adhered to, and a bond is not in place, the development is likely to suffer infractions and violations, which can cost both time and money.

How Does It Work?

As with all surety bonds, three parties are involved in a subdivision bond:

The municipal planning authority requiring the bond is the obligee.
The developer who must purchase the subdivision bond is the principal.
The company that underwrites and issues the subdivision bond is the surety.

By purchasing the bond, the principal is pledging to make all of the improvements identified in the subdivision agreement. The principal may also be guaranteeing to finish the project and pay the suppliers and workers.