Subdivision bonds are highly unique in various aspects when compared to other kinds of loans, specifically public works bonds.?There are several facets that separate a subdivision surety bond from other kinds, which makes it all the more important that you take the time to research.?Here are 4 unique aspects of a subdivision bond.



1. Governmental control

The governmental control that is mandated by the statutory scheme requires that a developer must enter into a subdivision agreement secured by subdivision bonds.?What this means is that the government has control over the designs and improvements of the subdivision and as the authority to overrule any plans.?

2. Roles and positions of the principal and obligee

In a subdivision bond, there is security as the surety mandates the obligations of the developer under the Subdivision Agreement.?The surety deals primarily with the developer to ensure that the performance of the job is done efficiently.?

As for the obligee, the subdivision bonds secure the obligations of the developer under the agreement and name the Public Agency as the obligee.?The primary difference in this is that the Public Agency has no obligation to pay the developer for the cost of the subdivision improvements.

3. Funding

The developer has the responsibility of funding the costs of constructing or placing the subdivision improvements.?There are a few things that must be considered during the shifting of funding.?First, you have to ask yourself if the developer has properly estimated the costs needed to complete the improvements.?Next, has the developer set aside sufficient funds to complete the subdivision improvements??And lastly, has the developer fulfilled its obligations by using the funds set aside to pay for the completion of the improvements, payment to the contractor and suppliers completing the improvements?

4. Coverage and limitation periods

The primary distinction between subdivision surety bonds and other bonds lies within the coverage.?A subdivision bond guarantees only the public improvement portion of the entire development.?Another distinction you will find is that subdivision bonds generally do not include coverage for performance guarantees, delays, and consequential and liquidated damages.

It is vital that you understand the unique aspects that make up subdivision surety bonds, because only then will you begin to truly appreciate what they can do.?As they differ from other bonds in many ways, this can be beneficial to you through the funding, coverage and many other areas.