Completion Bonding & The Approval Process

Any time that the common area improvements will not be completed in a development at the time of the first sale closing, a financial security must be posted to guarantee the eventual completion of the improvement.  The financial security amount is 120% of the estimate cost to complete.

While most development planning involves the completion schedule of improvements, and estimates the improvements to be completed prior to sales, it doesn’t always work out that way.  Unfortunately, once the White Report has been issued, the lack of completion presents a “Material Change,” necessitating re-filing with DRE to file the required security…. Including a 3- to 4-month delay in closings!

Our recommendation is to always plan conservatively; if the completion is scheduled to coincide with the initial sales closings, then the path to protect your schedule would be to provide estimated construction costs, and obtain DRE approvals with the assumption that the improvements will be bonded for, or otherwise financially secured.

Obtaining the approval up front to bond for incomplete improvements is just another way to guarantee no delays at closing time for those first escrows. 

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President

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