Securing a grading bond is a critical step in getting your project off the ground, but the process can seem complex if you’ve never done it before.
We believe that with a clear roadmap, this process can be simple and efficient. This guide walks you through the exact steps, from your initial application to the final, crucial step of getting your bond released.
Step 1: Start with the Right Conversation
You have two main options for starting the process, but both lead to the same goal: getting the requirements from the public agency.
- Option 1 (The Direct Route)
Contact the city or county permitting agency first. You need to ask them for two key pieces of information: the required bond amount and their specific, required bond form.
- Option 2 (The Guided Route)
Call a surety specialist like CSBA before you talk to the city. We are always happy to provide guidance on exactly what to ask for. This can be a helpful extra step to ensure you get all the correct information in one go.
Step 2: Gather Your Key Documents
Once you know the requirements, you will need to assemble a package for the surety company. Being prepared with this information is the best way to speed up your approval. You will typically need:
- The grading bond application
- The approved engineer's estimate
- The underlying permit application
- The agency's required bond form (if they don't have a specific one, the surety can use a standard form)
- Financial statements (personal and/or business, depending on how the property is held)
Step 3: Underwriting and Approval
This is where the surety company reviews your application. We often get asked what underwriters are looking for. While credit is a factor (especially for bonds under $500,000), the single most important question is: How will the project be funded?
The surety needs to be confident that you have the means to pay for the improvements you are promising to complete. For larger bonds, there will be more scrutiny on the financial information.
- Timeline: Once you have submitted all your information, the response time can be very fast. We've had clients get approved and bonded on the same day. A typical turnaround is 24 to 72 hours. Of course, on larger bond needs, with complicated information, it can take longer.
- Payment: The bond premium is due at the time the bond is issued.
Step 2: Gather Your Key Documents
One thing that is very important to keep in mind is that this type of bond will remain in force until it is formally released by the governing agency. This means that the bond will continue to renew annually after the initial term, even if you decided to stop moving forward with the project or if you sold the property. (For this reason, it’s important to note that if you do sell the property, you need to negotiate that the buyer replace your bond as part of the escrow requirements.)
It’s also important to note that simply ignoring the renewal premium and not paying the bill will not result in a bond cancellation. You will still be liable under the bond obligation and the renewal premium will likely be sent to collections.
Bottom line, make sure to reach out to the public agency for the bond exoneration letter as soon as you have completed the work, and/or reach out to your agent if you are concerned about how to get the bond released.
This brings us to the most important step.
Step 5: How to Get Your Bond Released (Exonerated)
Your bond does not simply “go away” when the work is done. You need to be proactive in obtaining a formal release and here are the steps:
- Fulfill Your Obligations: Complete all the work exactly as agreed upon in your permit.
- Schedule the Inspection: Contact the agency to have your work inspected and signed off.
- Get the Letter: This is the most crucial part. You must request that the agency provide a formal letter that specifically states your obligations have been fulfilled and the bond is released.
This letter is what the surety company needs to close the bond. It is the only thing that will stop the renewal cycle and formally release you of the bond obligation.
Navigating the bond process is simple when you have an advisor on your side. Working with a specialist ensures you have a partner to guide you from the initial application all the way to that final release letter. Please don’t hesitate to reach out for help!
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