Understanding the Financial Guarantee (Bond) Process

 

 

PURPOSE OF FINANCIAL GUARANTEES FOR SUBDIVISIONS AND PLANS OF DEVELOPMENT

Financial guarantees for completion of subdivisions and plans of development (POD) are accepted by Henrico County to ensure the proper construction of all required improvements shown on the approved plans. Guarantees for subdivisions can be posted so the subdivision plats can be recorded prior to the installation of the required improvements. This allows a developer to sell lots and/or construct houses sooner than if they had to wait until all improvements were constructed. For POD’s a guaranty can be posted to ensure the construction of minor improvements not completed at the time a certificate of occupancy is requested. These improvements can only be items that do not affect the safe use of the premises. They are frequently items that cannot be completed due to weather conditions or time of year. Both types of guarantees protect the public interest while providing the developer a measure of flexibility in the project.

 

 

LEGAL AUTHORITY

Legal authority for requiring financial guarantees is provided in both the Code of Virginia and the County Code. Subdivision guarantees are specifically provided for in Section 15.2-2241.5 of the Code of Virginia and Section 19-93 of the County Code. The authority to require POD guarantees is contained in Section 15.2-2286 of the Code of Virginia. This section empowers the zoning administrator to require guarantees for required improvements in the general enforcement of the zoning regulations. The County Code grants this same authority with regard to POD’s in Sections 24-106(I) and (n).

 

 

RECEIVING AND PROCESSING SUBDIVISION GUARANTEES

This is the policy of the Henrico County Planning Department regarding bonding for the completion of residential subdivisions, effective July 1, 2017.

  1. The owner or developer shall show roads, utilities, drainage, and other improvements on the plat, construction plans, and related specifications. The owner or developer must provide a cashier’s check or financial guarantee approved by the County Attorney to assure that the improvements will be completed at their expense. The amount of the financial guarantee shall be the estimated cost of constructing the improvements, as determined by the Departments of Planning, Public Utilities, and Public Works (the “Departments”), plus 10 percent as a reasonable allowance for estimated administrative costs, inflation, and potential damage. Except in unusual circumstances approved by the Director of Planning (such as large phased developments), the owner or developer shall complete the improvements within two years from the date of receipt of the financial guarantee.
  1. Staff from the Departments shall inspect the property one year from the date of receipt of the financial guarantee, unless the owner or developer has completed the improvements and received a return of its financial guarantee. The owner or developer shall be responsible for correcting any damage or deterioration of improvements that have been installed but not accepted by the County.
  1. Unless the owner or developer has completed the improvements and received a return of its financial guarantee, staff from the Departments will inspect the Property 90 days before the expiration of the financial guarantee. If the required improvements have not been completed at the time of inspection, the Planning Department will give the owner or developer written notice of the work necessary to complete the improvements, as well as notice that it will draw on the financial guarantee before it expires.
  1. In unusual circumstances such as a large phased development, the Planning Department may agree to an extension or replacement of the financial guarantee for the period reasonably necessary to complete the improvements. However, the amount of the extension or new financial guarantee shall be based on updated costs based on recent contract pricing or published cost indices, plus 10 percent of the updated amount as a reasonable allowance for estimated administrative costs, inflation, and potential damage.
  1. Prior to the usual two-year period for completing the improvements, the Planning Department may draw on the financial guarantee and arrange for the maintenance and completion of the improvements if one of the following occurs:
    1. Failure of the owner or developer to construct the improvements to the standards of the Departments or maintain the improvements in a condition acceptable to the Departments and other governmental agencies having jurisdiction over the improvements.
    2. The insolvency of, appointment of a receiver for, or filing of a voluntary or involuntary petition in bankruptcy against or by the owner or developer.
    3. The commencement of a foreclosure proceeding against the property or its conveyance in lieu of foreclosure.
  1. If the Planning Department draws on the financial guarantee, it shall deposit the funds in an interest-bearing account and shall use them to pay for maintenance or completion of the improvements. The owner or developer shall be liable to the County for costs to maintain or complete the improvements in excess of the financial guarantee and shall be entitled to a return of any unused funds upon completion of the maintenance and improvements.

 

RECEIVING AND PROCESSING PLAN OF DEVELOPMENT GUARANTEES

  1. A guaranty is accepted on a Plan of Development (POD) in situations where the required improvements have not been completed. This can occur where, due to weather conditions or the time of year, the required improvements cannot be completed prior to receiving a certificate of occupancy. Construction delays may also make completion of all improvements impossible before a planned opening date. The only acceptable forms of POD guarantees are letter of credit, certified check or cashier’s check.
  2. When necessary, the zoning enforcement officer assigned to inspect a POD will determine the guaranty amount, based on the cost of installation of the uncompleted items as shown on the approved plans.
  3. The Planning Department requires a letter of credit to follow a standard format, which is available upon request. (see below)
  4. Once all improvements are completed, the Planning Department will refund the amount that was posted or return the letter of credit to the financial institution, which ever is applicable.

 

 

BOND FORMATS
(most files are in MS Word format)

 

SUBDIVISION IMPROVEMENTS

Word.docx

Adobe.pdf
   Letter of credit (PREFERRED) sd-loc.docx sd-loc.pdf
   Surety bond sd-surety.docx sd-surety.pdf
   Assignment of CD sd-cda.docx sd-cda.pdf
POD IMPROVEMENTS
   Letter of credit (PREFERRED) pod-loc.docx pod-loc.pdf
   Surety bond pod-surety.docx pod-surety.pdf
   Assignment of CD pod-cda.docx pod-cda.pdf
DEFECT BONDS
   Letter of credit (PREFERRED) defect-loc.docx defect-loc.pdf
   Surety bond defect-surety.docx defect-surety.pdf
   Assignment of CD defect-cda.docx defect-cda.pdf
EXTRACTION SITES
   Letter of credit (PREFERRED) extloc.pdf
   Surety bond extsurety.pdf
   Assignment of CD extcdassign.pdf

 

 

Contact Us

Planning

Physical Address
4301 East Parham Road
Henrico, VA 23228

Phone
(804) 501-4602

Fax
(804) 501-4379

planning@henrico.us

Mailing Address
P. O. Box 90775
Henrico, VA 23273-0775

Additional Contact Info