What are the Types of Surety bonds?

The three most common types of surety bonds are: Bid Bonds Performance Bonds Payment Bonds

Are Surety Bonds paid monthly?

No. You don't pay month-to-month for sureties. When you are quoted a price for a surety bond, you make a one-time payment.

How do I apply for a surety bond?

Applying for a surety bond, no matter the sort of bond, is to contact a surety agency. For instance, you can reach CSBA here to get started on obtaining your surety bond.

What is a payment bond?

A payment bond ensures that all of a contractor’s laborers, subcontractors, and suppliers are paid on a particular project.

Who requires payment bonds?

Payment bonds are required on almost all public projects. General contractors sometimes require them of their subcontractors, and occasionally private owners will require them.

Who pays for a payment bond?

The contractor, or principal, purchases the bond and pays for it.

Do Payment bonds expire?

Payment bonds expire after the project is completed and statutory timeframe have lapsed.

What is the difference between a surety bond and a payment bond?

A payment bond is a type of surety bond. The only real difference is the qualifying term, in this case, it's "payment" and only notes what sort of surety bond it is.

What does a performance bond cover?

The performance bond covers the owner of the project against losses if the contractor fails to deliver on the project within the contractual provisions.

How long does a performance bond last?

Since performance bonds guarantee the completion of the contract, they last until the project is finished along with any required warranty period included in the agreement.

When can you release a performance bond?

Usually, a performance bond is released when the project is completed, though some public projects stipulate that a contractor gives a warranty following completion that the performance bond covers.

What is the difference between a performance and a payment bond?

We have a detailed article that explains the differences here , but the short answer is that the performance bond secures the contractor's promise to complete a job within the terms and conditions outlined at the agreed price while the payment bond protects subcontractors, vendors, and laborers against nonpayment.

What is the difference between a bid bond and a performance bond?

Bid bonds are required when contractors bid a project and guarantees if they are low bidder, they will enter into the contract and provide any required performance and payment bonds. Performance bonds guarantee the actual performance of the work to be completed by the contractor according to the terms of the agreement. What happens to a bid bond after a contract is signed? The bid bond is replaced by a performance bond if the bid is accepted and the contractor enters into a contract with the owner or general contractor.

Subdivision and Site Improvement Bonds Overview

What is a Subdivision/Improvement Bond?

Subdivision bonds, or site improvement bonds, are a requirement set by cities, counties, or other governmental and public agencies for property owners or developers who intend to file a lot map or obtain a building permit. Unlike performance and payment bonds, which protect either project owners or subcontractors working on the project, subdivision bonds guarantee that the project owner will finance and complete mandatory public improvements at no expense to the government body that has jurisdiction (municipality, county, etc.).

How Subdivision Surety Bonds Work

Subdivision bonds and improvement bonds provide a few different types of protection to municipalities:

Guarantee of Completion

Subdivision bonds ensure that the required public improvements (such as streets, sidewalks, utilities, and landscaping) are completed according to the municipality's standards and within a specified timeframe. This bond protects municipalities from being left with incomplete or substandard infrastructure.

Financial Security

If a developer fails to complete the improvements, the municipality can claim the bond to secure the necessary funds to finish the work. This bond ensures that the city does not have to use its budget or resources to complete the project.

Payment to Contractors

A payment bond is sometimes required as part of the subdivision or improvement bonds. These particular bonds will guarantee payment to the contractors, subcontractors, or material suppliers working on the project that they will be paid.

Subdivision Bond Application Requirements

To apply for subdivision and improvement bonds, you will generally need:

Bond Application

Credit check

Project scope

Engineer’s estimates

Confirmation of funding source(s) to complete the work

Company and personal financial statements

Applicable partnerships, trusts, or operating agreements

Subdivision Agreements with the municipality

Bond forms

Where California Developers Acquire Subdivision Bonds

There are two places where developers can go for their surety needs:

An Insurance Agent

An insurance agent may be able to issue subdivision bonds. However, they often lack the professional experience and industry connections with surety providers to offer all of the options available and make the process as smooth as possible.

A Surety Specialist

A surety agent has dedicated their professional life to surety bonds and helping California property owners and developers get the bonds they need. Due to this focus, they've been able to form relationships with numerous surety companies, they have access to special programs, and they are well versed in the complexities of getting a subdivision bond in place.

CSBA is a company of surety specialists and experts, having dedicated ourselves to surety bonds since 1984. With our team of over 225 years of combined surety experience, we are well-equipped to guide you through the bonding process.

FAQs

Who requires a subdivision bond?

Municipalities or local government agencies typically require subdivision bonds as a condition for approving a subdivision project. These bonds ensure that the property owner or developer satisfactorily completes the public improvements within the development.

Why are subdivision bonds necessary?

Subdivision bonds protect municipalities from financial risk by ensuring developers complete required public improvements. They also assure the public that infrastructure within new developments will meet established standards.

How is the bond amount determined?

The bond amount, often called the penal sum, is typically based on the estimated cost of the public improvements. Are there different types of subdivision bonds?
Performance Bonds: Guarantee the completion of the improvements according to the terms of the contract.
Maintenance Bonds: Ensure that the completed improvements remain in good condition for a specified period after completion.
Payment Bonds: Guarantee that the property owner or developer pays the contractors and suppliers for their work and materials.

Get a subdivision bond quote now

We specialize in providing subdivision and site improvement bonds for developers and property owners.

Fill out the form and one of our local expert subdivision bond agents will be in touch with you shortly.