Learn more about site improvement bonds, and apply today. Absolute Surety offers surety bonds nationwide through a convenient online application system.
What Are Site Improvement Bonds?
Site improvement bonds serve much the same purpose as subdivision bonds. The only difference between the two is that subdivision bonds apply only to new construction whereas site improvement bonds apply only to a contractor’s work on existing structures.
This type of bond ensures that the improvements described in the contract will be made exactly as specified, in accordance with current local building codes. These improvements may include upgrades or repairs to sidewalks, lighting, sewers, storm drains, roads, and other existing amenities. The bond protects the project owner from any financial loss stemming from non-completion of improvements.
Who Needs Them?
Contractors or developers are often required to purchase this type of bond as part of the process of getting a construction permit for the renovation of existing structures.
How Do They Work?
The three parties involved in a site improvement bond are:
The obligee—the project owner requiring the contractor to purchase the bond
The principal—the contractor who purchases the bond
The surety—the underwriter issuing the bond
The bond serves as the contractor’s pledge that the appropriate improvements will be made. If the contractor fails to make required improvements, it’s considered a breach of contract. The project owner or consumers who suffer a financial loss as a result have the right to file a claim against the bond. The surety will investigate to ensure that the claim is valid before paying it, up to the full penal amount of the bond. The principal is then obligated to reimburse the surety.
What Do They Cost?
The cost of a particular site improvement bond will depend on the required bond amount established by the obligee and the premium rate assigned to the principal. The premium rate is based on:
The amount of the contract
The principal’s credit score and financial statements
The principal’s industry experience and track record
Applicants who have good credit and are in stable financial condition will usually pay somewhere between 1% and 3% of the bond amount as the annual premium for the bond. Poor credit doesn’t mean you won’t be able to get bonded, but you may pay a higher premium.
Our experts will gladly answer any questions you may have about site improvement bonds. Or, if you prefer, simply complete our convenient online application form.
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Phil Bell, So Cal Performance