Site Improvement Bonds ensure that a contractor makes proper improvements to existing structures as per prevailing building codes. A site improvement bond guarantees completion of improvements including curbs and gutters, sidewalks, utilities, grading, storm drains and streets. The parties can specify the required improvements in the bond. The bond will also contain the estimated cost and anticipated time until completion. Site improvement bond differs from a subdivision bonds. While the site improvement bond is meant for existing buildings, a subdivision bond is for new structures. These bonds also guarantee that public property will be upgraded in accordance with applicable governmental regulations.
A contractor must secure a site improvement bond prior to obtaining a construction permit or recording a final parcel map with the locality where the property is based. The site improvement bond may be in the form of “certificates of deposit, cash, certified cashier’s check or money order, irrevocable letter of credit issued by a bank, credit union, etc and corporate surety bonds.”
Surety bonds are the most sought after option since letters of credit are susceptible to the bank’s immediate seizure of property if they choose not to renew the bond. Certificates of Deposit and cash are also not preferred because the onus of proof to show that the instrument is properly executed is on the recipient of the guarantee.
On the other hand, the site improvement bond allows the recipient more security. The contractor has to go through a preapproval process with these bonds and the bond assures that the work will be completed as per the agreement.