A grading bond is a specific kind of permit surety bond usually needed when a property owner, developer, or contractor wants to get a grading or general building permit. This happens when a project requires them to move a significant amount of earth that exceeds the amount set by the city or county. This bond is a financial guarantee for the city or entity requesting it. It ensures that all the grading work will be carried out in line with approved grading plans, following the law and meeting all the permit's conditions. Grading bonds are typically required by cities or counties rather than at the state level. The level of risk involved in these bonds can vary because it depends on the specific terms set by the city when requesting the bond.
The price of a grading permit can vary based on multiple factors. These include the specific requirements set by the city, the total bond amount, and the applicant's financial situation. Depending on how these factors come together, the rates for approved permits can range from as low as 1% for applicants with solid credit and up to over 10% for those with less favorable credit histories.
Each surety company has its unique rating system, meaning rates may differ. We've established partnerships with over ten surety companies to ensure our clients receive the most competitive rates. This enables us to provide our clients with the best possible rates on the market.
Certain cities or counties will require a grading bond when a certain amount of earth will be moved. According to their laws, these cities or counties will require a grading bond for a contractor to obtain a project’s building permit. The grading bond guarantees that this project will be completed correctly and is required due to the risks associated with grading land.
A claim may be filed on a grading bond when the contractor does not complete the work according to the government's regulations and the contract. Once a claim is filed, the surety company will investigate it. The surety company will investigate the claim's validity and value. The surety company will pay up to the bonded amount if the claim is valid to complete the project according to the contract. After the claim has been paid out, the surety company will require the contractor to pay back the amount paid for the claim. A surety bond differs from insurance because it protects the client for the project and does not protect the contractor from completing the work. This is another reason why it’s crucial to complete all projects according to the local regulations and according to the contract.
When applying for a grading bond, the insurance company providing the bond will need some information to determine the underwriting for the bond. Some information that may be requested is:
For smaller bonds under $100,000, the application process will be more straightforward since the risk is lower. For larger bonds above $100,000, you may be asked to provide all the listed documents for approval. Working with a surety agent will make this process easier, given their experience and the guidance they can provide during the application process.
The city or county will require the contractor completing the project to purchase a grading bond since the bond guarantees they will complete the work according to the contract. Even though the general contractor will purchase the grading bond, the bond will protect the public and does not offer any protection for the contractor.
A grading bond can be purchased as quickly as the same day the application starts. The time it takes to get a grading bond depends on various factors, such as the bond's size, the project's complexity, and the speed of underwriting. Once you receive a quote for the bond, you can purchase it, and we’ll issue the bond, making the process relatively quick and straightforward.
Because each grading bond is different and the time it can take to purchase one will vary, it’s best to get started on the bond application as soon as you know you’ll need one. We’ll do our best to get this bond purchased for you as fast as possible, so no matter when you reach out for your grading bond, we’ll make sure you can get it by the required date.
