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Subdivision Warranty Bond: A warranty bond (also known as a maintenance bond) guarantees for the public entity where the improvements were performed, that the developer, builder, or individual(s) will solve all warranty issues during the specified warranty period, which is usually 1 year from completion/acceptance of the improvement. The warranty period could be longer depending on the terms of the subdivision agreement. If developer, builder, or individual(s) is unable to solve the warranty issue or is not in business during the specified warranty period, the warranty bond provides the public entity where the improvements were performed with a remedy through the surety to fix the warranty issues.
When requesting a subdivision warranty bond on an account that has already been previously submitted to the surety, among the most important information that needs to be provided to the surety are the following information:
- The Bond Request form – this will provide the surety with a basic overview of the current bond being requested.
- A copy of the complete subdivision agreement. The subdivision agreement will verify among other things: that a bond is required; the penal sum of the warranty bond and the duration of the warranty period.
- The public entity will usually have their own warranty bond form. Provide the surety with a copy of the form so surety can verify language is acceptable.
- If another surety company provided the initial underlying subdivision performance and labor and materials payment bond, provide the current surety with an explanation as to why the prior surety that provided the initial bonds are now not issuing the smaller warranty bond.
- On smaller warranty bond requests (under $100,000), surety will most likely only ask for the most recent business and personal financial statements and most recent business and personal bank statements to verify access to cash.
If the warranty bond is the first bond being requested on behalf of a new developer and/or the size of the warranty bond exceeds $100,000, the following information might be requested by the surety.
- Developer's Questionnaire.
- Business financial statements (balance sheet, income statement, statement of cash flows and aging schedule for accounts receivable and accounts payable) for the company's last 3 fiscal year end.
- Interim Business Financial Statements.
- Personal Financial Statement for all owners of the company
- Articles of incorporation (if corporation), LLC agreement (if business is a LLC) or partnership agreement (if business is a partnership).
- Bank reference letter and last 3 months most recent business and personal bank statements.
- Copy of the trust if any of the owners of the business have their assets held in that trust.