Developer bonds
Subdivision and site improvement bonds in NJ
New Jersey towns can require developers to post a performance guarantee for site improvements, like streets, curbs, sidewalks, drainage and utilities, as a condition of subdivision or site plan approval, and a maintenance guarantee when those improvements are accepted.
Under the Municipal Land Use Law, the performance guarantee can be up to 120% of the engineer’s cost estimate and the maintenance guarantee up to 15% of the cost of the improvements; a surety bond is a common way to post them.
Who it’s for
- Developers and builders with subdivision or site plan approval in NJ
- Owners who need a guarantee before a final plat is filed or a permit issues
- Developers whose improvements are complete and need a maintenance bond to release the performance bond
Guarantees a NJ town can require
| Guarantee | Purpose | Amount under the MLUL |
|---|---|---|
| Performance guarantee | Ensures required improvements are installed | Up to 120% of the municipal engineer’s estimate |
| Maintenance guarantee | Covers defects after the improvements are accepted | Up to 15% of the cost of the improvements |
| Temporary certificate of occupancy guarantee | Covers improvements still needed when a temporary CO is issued | Set under the statute and local ordinance |
| Safety and stabilization guarantee | Secures a site left unstable if work stops | Set under the statute and local ordinance |
How surety bonds fit
- Towns use standardized performance and maintenance bond forms under N.J.A.C. 5:36-4
- The surety’s obligation is generally limited to 120% of the engineer’s certified estimate on a performance bond
- As improvements are approved, the developer can request partial release; the maintenance guarantee is usually posted before the performance guarantee is released
- Local ordinances add details, so check the resolution of approval and the town’s requirements
What to have ready
- The resolution of approval and the municipality’s bond requirements
- The municipal engineer’s itemized cost estimate
- Developer entity details and project description
- Developer financial statements and a list of completed developments
- Construction schedule and the contractor installing the improvements
- Owner names for the indemnity agreement
Mistakes that cost people later
- × Posting a bond on a form the town won’t accept
- × Not budgeting for the maintenance guarantee when the performance bond is released
- × Letting the bond lapse before the town releases it
- × Assuming every town’s ordinance is identical
Questions people ask
How much is a performance guarantee in NJ?+
Under the Municipal Land Use Law, up to 120% of the cost of the required improvements as estimated by the municipal engineer.
What is a maintenance guarantee?+
A guarantee, up to 15% of the cost of the improvements, that covers defects for a period after the town accepts them. It’s usually posted before the performance guarantee is released.
Can I post cash instead of a bond?+
Towns can require part of a performance guarantee in cash under limits in the law; the rest can usually be posted by surety bond or letter of credit. Check your resolution and ordinance.
How do I get my performance bond released?+
Request inspection and approval of the completed improvements; the town releases or reduces the guarantee under the MLUL procedures.
Sources
Related bonds
Performance & payment bonds
Bid, performance and payment bonds after you win the job, including NJ public works rules.
Increase bonding capacity
Surety won’t go bigger? What sets your single-job and aggregate limits, and how to raise them.
Declined for a bond
Weak credit, thin financials or a past claim: how hard-to-place bonds get written.
Bond approval, amounts and terms are decided by the surety based on its underwriting. Approval is not guaranteed. A surety bond is not insurance for the principal: if the surety pays a claim, the principal and indemnitors must repay it. Kevin Brown Insurance Agency does not provide legal advice; consult your attorney about court filings and contract terms.