A land subdivision is when a developer takes a piece of raw land with nothing on it, and divides it into smaller pieces or lots, presumably to build homes. The lots can become other things, but typically it is intended for homes. Let’s say you have a one-acre piece of property, and you want to subdivide that acre into four lots. Before the municipality will give you a permit and plat the land, they require a subdivision surety bond. Hence, the name of this article and why I am writing about it.
A developer subdivides the land with the intention of eventually or immediately building something. To do that, they are going to have to put in infrastructure, which consists of roads, sewer lines, sidewalks, curbs, etc. Before the municipality will plat (officially map the area) as four separate lots, they will tell you what needs to be done, and that you have to do it at your expense. Until they have a bond to guarantee that the work is, in fact, going to be completed, the obligee is not going to plat the project.
The bond guarantees that everything planned for inside the homes is going to be there and functioning correctly; you will be able to run the water and turn on the lights. When you flush the toilets, the bond is going to guarantee that there is a sewer line to eliminate the waste, etc.
Once you walk outside the home, you need to get to places. A road is going to be there when you need to drive on it. If there is a curb already there, you’re going to have to cut the curb for the driveway. You’re going to have to replace that curb with concrete at the lower levels. There are sewer hookups and sometimes the utility companies will require a payment to do that hookup. All these things that we take for granted, are what is required by the municipality for the developer to be permitted to construct.
Subdivision bonds are not only related to building subdivisions on raw land. They can also be required for multi-use buildings such as apartments that are built on small plots of land. In that case, there will need to be parking, so the developer will have to include a parking lot in their plans. The chances are fire hydrants will be necessary.
Any service coming in may require a hookup off site, such as the main sewer line that’s going to have to be extended into the development, paid by the developer. Anything that would be considered infrastructure — roads, sidewalks, safety issues, etc. to service that apartment building would almost inevitably be bonded.
Given all of the moving pieces of a subdivision and the subdivision bond requirement, it makes sense to start the bonding process before a bond is required in order to ensure that you can obtain one under favorable terms.
Neil Pedersen
PEDERSEN & SONS SURETY BOND AGENCY, INC.
15 Maiden Lane Suite #800
New York, NY 10038
212-227-7277
800-720-7277
neil@courtbondnow.com
Sign up for Our Newsletters