SUBDIVISION BONDS FOR TEXAS CONTRACTORS

COUNT ON STOKES SURETY BONDS

contractor holding his bid documents for tender date

Brief

If you are located in the United States, it is likely that you already understand the importance of some insurance policies. While bonds and insurance policies are nowhere near the same things, they do similarly do work and function.

That being said, one bond that you’ve probably been hearing a lot about lately is the subdivision bond. That’s because these bonds are not only growing more and more popular, but they are becoming pertinent for the everyday developer.

This is especially true for contractors, property owners, and developers. However, before you can understand how these bonds are significant to your business, you need to understand what these bonds are as well as how they work.

WRITTEN GUARANTEES

When it is all said and done, subdivision bonds are one type of construction surety bonds that are nothing more than written guarantees. Written guarantees saying that a contractor will meet specific performance obligations when developing land or subdivisions. Subdivision bonds are often referred to as developer bonds, land improvement bonds, sites improvement bonds, plat bonds, or performance bonds, but they are all pretty much the same thing. 

WRITTEN GUARANTEES BETWEEN THREE PARTIES

Okay, so right now, you know that a subdivision bond is a written guarantee stating that improvements will be made to land within a subdivision. That being said, there are usually three parties involved in these types of guarantees. These parties will be the obligee or the contractor, the principal or the owner of the project, and the surety or insurance company.

The principal, in this case, will be the developer of the land. This will be the individual or company that is legally required to meet specific contractual requirements. To learn more about this in detail, please take a look at performance bonds in a contract

The obligee in the equation will be the government party, commercial entity, or federal agency that requires the purchase of the bond.

The surety or the insurance company is the issuing entity of the bond.

These are the individuals that will be responsible if the developer fails to do his or her job. Oftentimes, when the surety does have to pay out because contractual agreements are not met, they will seek out the principal or land developer for reimbursement. 

THE SIGNIFICANCE OF THESE BONDS

Just from the above information, you can already see a number of instances where these bonds could come in handy. However, the number one reason that these bonds are so important is that they are likely going to be required by law. If you, as a land developer or contractor, are undertaking a federal or government project in the United States, you will be required by law to purchase one of these bonds.

They are a written guarantee saying that the contractor will complete improvements in the requested time frame under the request circumstances. The circumstances for these bonds can be different as well as the type of work that they cover. They can cover everything from subdivision land upgrades to sidewalk work, electrical upgrades, or grading changes.

When you really sit down and think about it, a subdivision bond is nothing more than an insurance policy that will offer financial compensation to one party if the other does not meet the agreed-upon terms in the agreed-upon time. Sounds simple enough, right? While it might sound simple, the subdivision bond is anything but.  

WHAT DO SUBDIVISION BONDS COST TODAY?

Whether you are dealing with quality surety providers like Stokes Surety Bonds or an entirely different company, you’ll usually end up paying right around 3 percent of the total bond amount. However, several different factors can come into play that might impact the overall price. These factors can vary from bond provider to bond provider.

That being said, it is probably obvious that the type of contract as well as the size of the contract is going to impact the overall price. Obviously, if the contract is huge and for a lot of money, you can expect to pay more. 

This is probably pretty obvious, however, what many contractors don’t understand is that there are still other factors that can come into play. This could include anything from the history of the contractor to their credit history. Since insurance companies are at the mercy of contractors and developers, they will consider a variety of factors when deciding to insure a company or not.

The main goal is to for the insurance company to try and determine the trustworthiness of a company. This is exactly why acquiring a subdivision bond can be a long and complicated process. It is one that will require credit checks as well as financial statements, application forms, project outlines, and funding information.

Stokes Surety Bonds, as was mentioned above, are experts at helping contractors and land developers find the right subdivision bonds. They are here with the intent to make it much easier and simpler to find the types of bonds you are seeking. Not only this, but they’ll help you find them at the most affordable rates possible.  

To learn more about this in detail, please take a look at cost of performance bonds.

HOW DO YOU GET A SUBDIVISION BOND?

Subdivision bonds are types of guarantees that are generally required at the time a developer files a contract with a public, government, or federal agency. Luckily, if a contractor does win the bid and he or she obtains all the necessary paperwork, everything else can be filed online. To learn more about this in detail, please take a look at how to obtain a performance bond.

This something that can be done on the official site of Stokes Surety Bonds or the official site of the insurance company you are working with. Doing everything online is more than handy, as you’ll likely be notified immediately as to whether or not you have been approved and how much you’ll need to pay to get started with your coverage. The price of the bond will be determined before you file all the paperwork, but you can always get a rough estimate. This is pretty much what a quote is. To obtain a free quote immediately, please fill out the form.

As was mentioned above, you’ll end up paying a percentage of the overall cost of the bond. That being said, the percentage of such bonds is usually 3 percentage, but once again, this can vary depending on several different factors, including the type of insurance provider that you decide to go with.

COVERING THE FINANCIAL RISKS

While being a new company does lower your overall chances of securing a subdivision bond, it doesn’t mean that you’ll be discounted entirely. Much more important than this is whether or not you and your company can cover the financial risks of the bond.

Does your company have the credit and history to reimburse the surety company if something goes wrong during the development of the land? This is without a doubt the most important thing that insurance companies look at. It is also the first thing that they’ll check when deciding whether or not to issue the bond.  

However, once you have been assigned a project and you fail to uphold your end of the agreement, you will be bound to compensate the obligee which increases financial risks even further. To learn more about this in detail, please take a look at a  performance bond being called.

NEED A CONSTRUCTION SURETY BOND FOR A JOB? COUNT ON STOKES SURETY BONDS