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Subdivision Bonds in Fullerton, CA

Lesron Is the Surety Bond Specialist for All Your Bond Needs

In order to protect their clients, many contractors and developers are required to purchase a surety bond, also known as a completion bond or performance bond, when they start a new project. The best way to describe a surety bond is as a type of insurance for your client that is paid for by you. It ensures them protection should you not finish the job or follow the rules of the agreement. Purchasing these bonds are often required, but will also make you more a more desirable contractor to work with because clients will know they’re protected. Lesron Insurance provides many types of surety bonds, including subdivision bonds to Southern and Northern CA contractors and developers. We only work with trusted partners to help you get the best rates on bonds. If you would like more information about the bond process, please reach out to us today.

What is a Subdivision Bond?

A subdivision bond is a bond that guarantees the completion of improvements made to subdivision property, such as gutters, sidewalks, curbs, sewers, utility lines, and others, in accordance with local regulations. It is purchased by the landowner as a form of insurance when local government authorities require upgrades or changes to the property. A subdivision bond will ensure the work is completed to appropriate standards and that the contractor honors the terms of the agreement. In most cases, the initial bond term is two years. However, if the work is not completed within this time, the bond will renew annually until the job is completed and released by the government authority.

Why Are Surety Bonds Needed?

In many political jurisdictions, some statutes require a property owner or developer to provide a form of financial security that guarantees their completion of designated improvements. This financial security must be proven before the contractor is granted a construction permit or before the recordation of a final parcel map. Therefore, surety bonds, and subdivision bonds, in particular, are often required before work on the project can even begin. This type of guarantee is needed to assure clients of the following:

  • That the contractor has the necessary financial resources to pay for the proposed improvements
  • That the improvements will be constructed as required in the specified period
  • That the contractor will maintain the improvements they make for a minimum of one year against defective workmanship and materials

The Difference Between Subdivision Bonds & Other Bond Types

The primary difference between a subdivision bond from a standard contract performance bond is that the owner or developer of the property must pay the cost of building the bonded improvements rather than the public agency. This could lead to potential issues if you are a general contractor who has been hired by the owner to complete the bonded improvements. In these such cases, the general contractor should not post bonds on behalf of the landowner, as this would make the contractor responsible for paying for and finishing the improvements regardless of whether the owner has paid them or will pay them for the work. It’s best to let the owner post a subdivision bond themselves, so you as a contractor are protected.

Potential Alternatives to Surety Bonds

Though there are alternatives to surety and subdivision bonds, Lesron Insurance believes a bond is usually the best option for landowners or contractors. This is especially true when you work with our team, as well will ensure you get the best rate. In addition, we will also build a relationship with you so that you can work with us over and over as your go-to surety bond specialist. However, we still want you to know all your options, so we’ll tell you about some of the alternatives to surety bonds and allow you to compare them. Without a surety bond, an owner or developer will likely have to select a different option to guarantee the completion of improvements. Some of these options include:

  • Irrevocable letters of credit issued by a financial institution, i.e., a bank
  • Certificates of deposit (CDs)
  • Tripartite agreement
  • Other, such as cash, certified cashier’s check or money order

Advantages of Surety Bonds

When it comes to making any decision about your business or property, you have to do your research and ensure you’re making the right choice. Many alternatives to subdivision bonds come with prominent disadvantages, such as the potential to tie-up your money or incur additional fees. On the other hand, a bond has significant advantages, such as:

  • Provide prequalification through the underwriting process
  • Does not tie-up your source of funding
  • The full amount of the bond is always available regardless of how much the owner spent to make the improvements
  • The surety’s claims department will help to facilitate resolution if a problem arises

Required Information to Apply for a Subdivision Bond

If you are interested in applying for a subdivision bond, there are a few pieces of information you will be required to provide. You can work directly with our team during the application process to ensure it goes smoothly. The items you will need include:

  • Engineers estimates and agreement – If you are an LLC attach a copy of the Operating Agreement
  • Attach bond forms
  • Attach financial statements for business and business owners
  • Subdivision Bonds
  • Department of Real Estate (DRE) Surety Bonds
  • Monument Bonds
  • Completion Bonds
  • Subdivision Performance and Payment Bonds
  • Site Improvement Bonds
  • Subdivision Tax Bonds

Send Us Your Application

  • Max. file size: 100 MB.

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