A subdivision bond is required by city and county governments before a developer can record a subdivision plat or pull building permits. The bond guarantees that the developer will complete all required public improvements—streets, curbs, gutters, sidewalks, water and sewer lines, storm drainage, and street lighting—to the jurisdiction's standards.
When a developer plats new lots for sale, the local government wants assurance that buyers will eventually have functional infrastructure. Rather than waiting for the developer to finish before approving the plat, the municipality accepts a subdivision bond as a financial guarantee. If the developer walks away or runs out of money, the surety company steps in with the funds needed to complete the public improvements.
Subdivision bond amounts are based on the engineer's estimated cost to complete the public improvements, often with a contingency of 10–25% added by the jurisdiction. Bonds typically range from $50,000 for small infill projects to several million dollars for large master-planned communities. The bond stays in place until the municipality formally accepts the improvements—which can take one to three years after construction is finished.
Subdivision bonds are heavier underwriting than license bonds because the surety is guaranteeing project completion, not just compliance with a regulation. Underwriters review the developer's personal and business financial statements, project pro forma, construction budget, financing source, contractor selection, and prior subdivision experience. Strong personal indemnity from the principals is typically required.
Builders and underwriters split a project into two kinds of work. "Sticks and bricks" is the vertical work, the actual building: framing, masonry, structural steel, roofing, and finishes. Horizontal work is the site work around it: grading, streets, curbs and gutters, sidewalks, storm drainage, sewer and water lines, and street lighting.
The two are bonded differently. A subdivision bond or site improvement bond almost always guarantees the horizontal work, because a city or county requires it before you can record the plat. The vertical sticks-and-bricks building is guaranteed by contract performance and payment bonds tied to the construction contract. A single development can need both, and a surety looks at each one differently: horizontal bonds lean on the developer's balance sheet and the estimated cost of the improvements, while vertical performance bonds lean on the contractor's experience and the contract. If someone tells you that you "need a bond," it is worth confirming whether they mean the site bond, the vertical performance bond, or both.
California developers of common-interest and time-share communities post bonds through the Department of Real Estate as a condition of their public report. These are different from municipal subdivision bonds and are grouped by what they guarantee:
Use the form below to start your subdivision bond application. We work with multiple A-rated sureties who specialize in land development bonds, so we can shop your file to the markets most likely to write your project at the best terms.
Complete our secure application and sign electronically. We quote your bond with multiple A-rated surety carriers and follow up for any documents needed. Most applications receive a response within one business day.