Surety Bond Quarterly - Fall 2016 - 17


Feature

Six Considerations
in Underwriting

Subdivision
Bonds (Part 2 of 2)
BY ARMEN SHAHINIAN AND BETH J. ROTENBERG
Introduction
As we discussed in Part 1 of this article, which appeared in
the summer issue of Surety Bond Quarterly, given the very
specific nature of subdivision bonds, which are limited to
the construction of subdivision improvements in accordance
with a particular Statutory Scheme,t there are certain considerations to which surety bond producers and underwriters
should pay particular attention when placing and underwriting these bonds. In Part 1, we examined the importance of
(a) familiarity with the Statutory Scheme, and (b) familiarity
with the developer's construction costs and funding obligations. The four remaining considerations are discussed below.
Underwriting Considerations Continued
1. Obtain Project Schedule and Monitor Work Progress
The surety may wish to obtain a projected schedule of
completion of the subdivision improvements from the
developer; and monitor the progress of the subdivision
improvement work by requesting periodic status reports

from the developer. It may discuss any delays with
the developer and obtain assurances that the project
will be completed on a timely schedule.
Monitoring the progress of the work is particularly
important in order to limit any potential liability under
the Subdivision Bond. Once a Subdivision Bond has
been issued and delivered to the Public Agency, the
surety may be held liable up to the full penal sum of
the Subdivision Bond. However, the Statutory Scheme
may provide a mechanism to obtain a reduction of the
penal sum of the Subdivision Bond as construction
of the required improvements is completed. Such
reductions in the penal sum act as a partial release of
the surety, and, therefore, limit the surety's potential
liability should the developer be declared in default
or otherwise fail to complete the remaining improvements. However, a reduction of the Subdivision Bond
penalty is not automatic. The developer must comply
with statutory requirements for obtaining the Public
Agency's approval of completed work and a reduction of the Subdivision Bond. Therefore, a prudent
developer and surety should be vigilant in making
sure that Subdivision Bond reductions are requested
as work progresses.

NATIONAL ASSOCIATION OF SURETY BOND PRODUCERS | WWW.NASBP.ORG

17


http://WWW.NASBP.ORG

Table of Contents for the Digital Edition of Surety Bond Quarterly - Fall 2016

NASBP Upcoming Meetings & Events
2016-2017 Executive Committee
From the CEO: Success Comes with Sharing Perspective and Knowledge
Practical Insights: A Contractor’s Risk Management Portfolio Should Include a Commercial Crime Policy
Rethinking the Change Order Process: NECA Foundation’s Guidelines Offer New Approach, Substantially Reducing Change Order Costs
Six Considerations in Underwriting Subdivision Bonds (Part 2 of 2)
Affirmative Action and the Office of Federal Contract Compliance Programs: What Surety Professionals and Their Contractors Should Know
Surety Data Standards: What are They, and Why Should Surety Professionals Care about Them?
2016 NASBP Resource Directory
Index to Advertisers
Surety Bond Quarterly - Fall 2016 - cover1
Surety Bond Quarterly - Fall 2016 - cover2
Surety Bond Quarterly - Fall 2016 - 3
Surety Bond Quarterly - Fall 2016 - 4
Surety Bond Quarterly - Fall 2016 - 5
Surety Bond Quarterly - Fall 2016 - 6
Surety Bond Quarterly - Fall 2016 - 2016-2017 Executive Committee
Surety Bond Quarterly - Fall 2016 - From the CEO: Success Comes with Sharing Perspective and Knowledge
Surety Bond Quarterly - Fall 2016 - 9
Surety Bond Quarterly - Fall 2016 - Practical Insights: A Contractor’s Risk Management Portfolio Should Include a Commercial Crime Policy
Surety Bond Quarterly - Fall 2016 - 11
Surety Bond Quarterly - Fall 2016 - 12
Surety Bond Quarterly - Fall 2016 - 13
Surety Bond Quarterly - Fall 2016 - Rethinking the Change Order Process: NECA Foundation’s Guidelines Offer New Approach, Substantially Reducing Change Order Costs
Surety Bond Quarterly - Fall 2016 - 15
Surety Bond Quarterly - Fall 2016 - 16
Surety Bond Quarterly - Fall 2016 - Six Considerations in Underwriting Subdivision Bonds (Part 2 of 2)
Surety Bond Quarterly - Fall 2016 - 18
Surety Bond Quarterly - Fall 2016 - 19
Surety Bond Quarterly - Fall 2016 - Affirmative Action and the Office of Federal Contract Compliance Programs: What Surety Professionals and Their Contractors Should Know
Surety Bond Quarterly - Fall 2016 - 21
Surety Bond Quarterly - Fall 2016 - 22
Surety Bond Quarterly - Fall 2016 - 23
Surety Bond Quarterly - Fall 2016 - Surety Data Standards: What are They, and Why Should Surety Professionals Care about Them?
Surety Bond Quarterly - Fall 2016 - 25
Surety Bond Quarterly - Fall 2016 - 26
Surety Bond Quarterly - Fall 2016 - 2016 NASBP Resource Directory
Surety Bond Quarterly - Fall 2016 - 28
Surety Bond Quarterly - Fall 2016 - 29
Surety Bond Quarterly - Fall 2016 - 30
Surety Bond Quarterly - Fall 2016 - 31
Surety Bond Quarterly - Fall 2016 - 32
Surety Bond Quarterly - Fall 2016 - 33
Surety Bond Quarterly - Fall 2016 - 34
Surety Bond Quarterly - Fall 2016 - 35
Surety Bond Quarterly - Fall 2016 - 36
Surety Bond Quarterly - Fall 2016 - 37
Surety Bond Quarterly - Fall 2016 - 38
Surety Bond Quarterly - Fall 2016 - 39
Surety Bond Quarterly - Fall 2016 - 40
Surety Bond Quarterly - Fall 2016 - 41
Surety Bond Quarterly - Fall 2016 - Index to Advertisers
Surety Bond Quarterly - Fall 2016 - cover3
Surety Bond Quarterly - Fall 2016 - cover4
Surety Bond Quarterly - Fall 2016 - outsert1
Surety Bond Quarterly - Fall 2016 - outsert2
Surety Bond Quarterly - Fall 2016 - outsert3
Surety Bond Quarterly - Fall 2016 - outsert4
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