Everything You Need to Know About Road and Sewer Bonds
When securing a road or sewer bond, it’s important to understand how surety bonds differ from insurance. While often mistaken for insurance, a road or sewer bond is actually a financial guarantee between three parties, the developer, the local authority, and the surety provider, ensuring that infrastructure works are completed to the required standards. This article will explain the role of surety in road and sewer bonds, why it’s required, and how it protects all parties involved in the agreement.
What is a Road and Sewer Bond, and Why is it Important?
Road and Sewer Bonds are not a form of insurance, but rather a type of surety bond that acts as financial protection to the local authority or water company. When a developer undertakes a construction project involving new roads and/or sewers the local authority or water company will typically only agree to adopt the completed infrastructure if a road or sewer bond is in place. This bond ensures that the required works will be completed to adoptable standards, and provides security for the local authority/water company in the event that the developer fails to meet their obligations.
Road and Sewer Bonds provide a financial guarantee that the developer will meet the obligations outlined in the contract. This includes completing the works to the required standards and within agreed timelines. If the developer fails to do so, due to delays, substandard workmanship, or incomplete construction, the bond can be called upon to cover the cost of rectifying the issues.
Who Takes Out Road Bonds?
Road Bonds are the responsibility of the developer or contractor, as they are ultimately liable if the terms of the road and sewer agreements are not fulfilled. The bond provides assurance to the local authority that, should the developer fail to complete the works to the required standards, the necessary funds will be available to remedy the situation. Some housing associations act as the developer on some social housing schemes which therefore require them to take out a bond.
What Are the Features of A Road and Sewer Bond?
The features of a road and sewer bond can differ based on the project, but broadly speaking, they consist of the following:
- Financial Guarantee – Road and Sewer Bonds are issued by a bank or surety provider and the value of the bond typically represents a percentage of the estimated costs to complete the road or sewer works.
- Bond Duration – Road and Sewer Bonds are procured for a minimum industry standard two year period and continue until the associated site infrastructure is completed, inspected and adopted. Road and Sewer Bonds may be reduced at key completion milestones throughout the phase of the project, such as when the bond is put on maintenance.
- Triggers for Calling Upon Bond – Insolvency of the developer or works not completed to an adoptable standard within the agreed timeframes.
- Conditions of Bond – These are specified within the agreement and consist of design specifications, timelines, inspection procedures and conditions for adoption and bond cancellation.
Find out more about the features of Road and Sewer Bonds in our blog.
Why Choose RS Bonds for Road and Sewer Bonds?
We use our unparalleled technical expertise and extensive Local Authority/Water Company relations, combined with established contacts within the Surety Market, to help satisfy all site infrastructure bond requirements held by developers.
