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Thread: When to post bonds?

  1. #1
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    When to post bonds?

    Our town has always required that required bonds for improvements in subdivisions be posted when the mylars are filed and are returned when our town engineer certifies that they are built to code.

    We recently had a developed started building his common driveways before the mylars were signed and filed and he now wants to pay only half the bond to cover what hasn't been done yet.

    How do others handle this?

  2. #2
    Super Moderator luckless pedestrian's avatar
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    remember, the prupose of the bond is make sure the developer builds the road - so if he skips town and sells the lots (which is the genesis of subdivision), the town can still construct the road and the new homeowner doesn't get $crewed

    [a bond also is often required if any other work is being done in the right of way]

    when I worked in Massachusetts, the bond was an option - that is, if the developer wanted to build the road first before selling lots, they could do that, though very few developers wanted to put that much money out there though without a return - but if they wanted to sell lots (usually to get some capital to build the road), then we would require that they put some money up as assurance, the bond

    so as long as the town engineer signs off on the construction that it was done to town standards, then I think you can reduce the bond - if he didn't build to town standards, then that's another story

    Here in Maine, everyone builds a private way, rarely public so there's less oversight, unfortunately - and very few towns, including mine, have a town engineer

  3. #3
    Cyburbian MD Planner's avatar
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    We require surety, bond, letter of credit, whatever you want to call it, for all public improvments and landscaping. This has to be posted before final signatures are obtained. The developer may then request deductions as portions of the project are completed as long as the inspectors agree. You'd be amazed how many partial sureties are still here in our office for projects that have been done for several years. It's up to the developer to request reductions/releases, we don't proactively look at the money we're holding and give it back to projects. That would be way too time consuming.
    He's a planner, he's a dreamer, he's a sordid little schemer,
    Seems to think that money grows on trees . . .

  4. #4
    Cyburbian Jeff's avatar
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    Bonding only covers unfinished work. No reason to require the guy put up bond for work already completed. In fact, alot of places release bond money in chunks as the work is completed.

    A developer only has so much bonding capacity.

  5. #5
    Forums Administrator & Gallery Moderator NHPlanner's avatar
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    Quote Originally posted by luckless pedestrian View post
    when I worked in Massachusetts, the bond was an option - that is, if the developer wanted to build the road first before selling lots, they could do that, though very few developers wanted to put that much money out there though without a return - but if they wanted to sell lots (usually to get some capital to build the road), then we would require that they put some money up as assurance, the bond so as long as the town engineer signs off on the construction that it was done to town standards, then I think you can reduce the bond - if he didn't build to town standards, then that's another story
    We used to do it that way....nothing but nightmares for our DPW to enforce and collect bonds when road work started first.

    Our regs were re-written in 2000, and we now require the bond prior to final approval:

    Prior to commencing any construction on a project, all the conditions of approval shall be met, the plan has been signed by the Planning Board, a preconstruction meeting has taken place with the Public Works Department, and the applicant has posted a performance surety to guarantee the completion of improvements. The performance surety shall be in the form of the “Hampton Method Letter of Credit” (copy on file with the DPW) or a cash bond on deposit with the Town in an interest bearing account. All Letters of Credit required by these regulations must be posted by a Town approved bank.

    Quote Originally posted by Jeff View post
    Bonding only covers unfinished work. No reason to require the guy put up bond for work already completed. In fact, alot of places release bond money in chunks as the work is completed.

    A developer only has so much bonding capacity.
    Our DPW will release portions of the surety as work progresses, and is inspected, as Jeff outlines above.
    "Growth is inevitable and desirable, but destruction of community character is not. The question is not whether your part of the world is going to change. The question is how." -- Edward T. McMahon, The Conservation Fund

  6. #6
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    The surety bond agency and carrier may appreciate you requiring the bond of the contractor for work that is already satisfactorily completed, but there really is not point. If the work has been reviewed and it meets your standards then you are in good shape, as the bond will be reduced annually as worked is completed anyhow.

    If you are not pleased with the work done this far then you might want to keep the bond at the original amount. Otherwise, you are letting them off the hook for work that was not done properly.

    In the future always require the bond prior to work commencing.

    Good luck!

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    Cyburbia Administrator Dan's avatar
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  8. #8
    Cyburbian solarstar's avatar
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    Actually, we've used separate bonds for those improvements (private or public) that aren't completed yet and those that are. The bonding amount is obviously much smaller for those improvements already completed (15% of the total construction cost), but it is a "maintenance bond" so that we're not out if things crumble and the developer skips town. After 3 years, the bond is released completely. For partial constructions, it would still need the whole thing bonded since we're not about to start doing partial inspections.

  9. #9
    Cyburbian
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    Quote Originally posted by farprof View post
    Our town has always required that required bonds for improvements in subdivisions be posted when the mylars are filed and are returned when our town engineer certifies that they are built to code.

    We recently had a developed started building his common driveways before the mylars were signed and filed and he now wants to pay only half the bond to cover what hasn't been done yet.

    How do others handle this?
    If your procedures and rules do not allow it; do not allow it. It can be an administrative nightmare dealing with bond reductions for every minor improvement that is made. Think long and hard before changing your rules related to bonding. Was any of his work inspected while it was being built? How do you know whether they have been constructed to standards if they were constructed, or so it seems, without anyone being aware of his activity?

  10. #10
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    Usually in MA (based on fairly extensive case law) Planning Boards are limited in the "when and how much" related to the subdivision bonding process. For one, we cannot require a bond until such time as the developer asks for legal release of one or more lots. When we endorse the approved subdivision plan we also sign a covenant that restricts sale of the subdivision lots until the improvements are completed, or in the alternative a bond is placed sufficient to "guarantee" that the improvements get done.

    The developer can complete virtually any amount of the work before asking for lot releases, thereby triggering the bonding requirement, and at that time the value of the bond can only be an amount adequate to cover the remaining improvements to be completed per the plans.

    Also, again based on fairly comprehensive case law, we can only maintain a balance in the bond account that is a reasonable estimate of the remaining work to be done (with some cost escalating factors allowed to be factored in).

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