# How Cities Accept, Reduce and Release Subdivision Improvement Security

URL: https://mycontractorsinsurancequote.com/resources/city-subdivision-improvement-bond-overview
Updated: 2026-10-29 · Reviewed by the Principal, Gleason Insurance Brokers, LLC
Publisher: My Contractors Insurance Quote, a website of Gleason Insurance Brokers, LLC

A city releases subdivision improvement security in stages: performance security when the work is completed and accepted, payment security after the lien-recording period passes, and any warranty amount after the warranty period ends. In California, Government Code §66499.7 sets that order and gives developers a written process to request a partial release before everything is done. Until the city releases the bond and the surety confirms it is exonerated, the bond still counts against the developer's surety capacity.

## Key Decision Points
- Acceptance by the city, not physical completion, is what starts release of the performance security.
- California developers can request one statutory partial release by notifying the agency in writing with a list of completed work.
- A partial reduction is not acceptance; risk of loss and maintenance stay with the developer until the city accepts the improvements.
- Payment security is reduced to recorded claims, or released in full if none, after the lien period and acceptance.
- Texas, Arizona and Nevada release steps come from each city's ordinance and agreement, so read them before the work starts.

## Acceptance Is the Event That Starts Release

Under California Government Code §66499.7(a), security for faithful performance is released when the act is performed or the required work is finally completed and accepted. Finishing construction is not enough. The city or county inspects, requires punch-list items, confirms record drawings and other closeout items and then accepts the improvements, often by council or board action or by a delegated official. Until that acceptance, the developer still owns the obligation.

When the security is documentary, such as a surety bond or a letter of credit, the statute directs the legislative body to release the document and return the original to the issuer once the work is complete and accepted. If the agency cannot return the original, it releases the security by written notice sent by certified mail to the developer and the issuer, no later than 30 days after acceptance, stating that the work was completed and accepted, describing the project and bearing the notarized signature of the agency's authorized representative.

For the bond's forms, amounts and underwriting before the work starts, see [what a subdivision improvement bond secures](https://mycontractorsinsurancequote.com/construction-surety-bonds/subdivision-improvement-bonds).

## California's Partial Release Process, Step by Step

Section 66499.7 lets a developer ask for a reduction before everything is finished. When the developer believes the secured work is complete, it may notify the local agency in writing with a list of the completed work. The agency then has 45 days to review and comment on or approve completion. If it disagrees that all work is done, it supplies a list of the remaining work.

The developer then has 45 days from receiving that list to submit cost estimates for the remaining work, and the agency has 45 days to review, comment on and approve, modify or disapprove them. If it approves the estimate, it releases all performance security except an amount up to 200 percent of the estimated cost of the remaining work. The statutory process applies when the remaining work does not exceed 20 percent of the original performance security, unless the agency allows an earlier release, and the agency is not required to run it more than once between the start of work and acceptance.

A reduction is not acceptance. The statute says the developer keeps the risk of loss or damage and the duty to maintain the improvements until the agency accepts all required public improvements. Substitute bonds may replace released security, but the release takes effect only after the agency receives and approves the replacement.

- Developer gives written notice of completed work with a list.
- Agency reviews for up to 45 days and lists any remaining work.
- Developer submits cost estimates for remaining work, up to 45 days after receiving the list.
- Agency reviews the estimates for up to 45 days.
- Agency releases performance security above 200 percent of the approved remaining-work estimate.

### Illustrative scenario: Partial Release on a Sacramento County Tract

A developer finishing a 120-lot tract in a Sacramento County city has completed the streets and wet utilities, but the city's landscaping and final paving lift remain. The developer sends written notice with a list of completed work under Government Code §66499.7(b). The city responds with a remaining-work list, the developer submits cost estimates and the city approves them. Because the remaining work is under 20 percent of the original performance security, the city releases all but 200 percent of the remaining-work estimate. The developer's surety issues a reduction rider, and the freed capacity supports bonds for the next phase.

## Final Release of the Performance Security

Once the improvements are complete, §66499.7(f) requires the agency to notify the developer in writing, 45 days or less after completion. The release of any remaining performance security then goes on the legislative body's agenda for approval no later than 45 days after that notice. If the agency has delegated release authority to an official or employee, the remaining performance security is released no later than 60 days after the written statement of completion.

Developers often lose time in the gap between field completion and the formal written notice. Closeout packages, as-built drawings, final inspection sign-offs and any required maintenance or landscaping establishment periods should be organized before the last item is built, so the agency's notice can issue promptly. A developer that tracks each phase's acceptance date can predict when capacity will come back to its surety program.

For how insurance and bonds fit across the site improvement phase, see [insurance for subdivision site improvement work](https://mycontractorsinsurancequote.com/projects/subdivision-site-improvements).

## Payment Security and the Warranty Hold

Labor-and-materials security follows its own clock. Under §66499.7(h), after the time to record claims of lien has passed under the Civil Code and the work is accepted, the agency reduces the payment security to the total claimed by claimants who recorded liens and gave the legislative body written notice. If no claims were recorded, the security is released in full. Clearing supplier and subcontractor balances before acceptance shortens this step.

Release does not reach the warranty. Section 66499.7(i) says the release does not apply to the warranty period required by §66499.9, to the amount the agency considers necessary for that period, or to costs and reasonable attorney fees. Under §66499.9, the warranty period is one year after completion and acceptance. Many agencies keep a reduced amount of the faithful performance bond or take a separate warranty bond for that year, then release it after a final walk-through confirms no open defects.

For how open bonds affect single and aggregate capacity, see [contract surety and bonding capacity](https://mycontractorsinsurancequote.com/construction-surety-bonds).

## Release in Texas, Arizona and Nevada Cities

Neither Texas nor Arizona has a statewide release schedule like California's §66499.7. In Texas, Local Government Code chapter 212 lets municipalities require surety before approving development plans, and the city's subdivision ordinance and development agreement set the acceptance, reduction and warranty steps. Where §212.0106 applies in certain counties, the water and sewer bond is conditioned on the facilities being built within the time stated on the plat or any extension, which ties release to that deadline.

In Arizona, A.R.S. §9-463.01 directs each municipality to require bonds, assurances or other security by ordinance, and the same ordinance usually controls how assurances are released. Developers working in both states should request each city's written release procedure and its standard acceptance letter at the start of the project and build those steps into the closeout schedule.

Nevada likewise leaves release to local code under NRS 278.380. North Las Vegas allows up to two reductions per off-site agreement and never below 10 percent of the original surety, Washoe County caps a reduction at 90 percent of completed work and 75 percent of the guarantee, and Clark County holds its bonds until the Director of Public Works accepts the improvements.

For the developer's full project program, see [insurance and bonding for subdividers](https://mycontractorsinsurancequote.com/who-we-serve/developers-subdividers).

## What the Surety Needs to Close the Bond

A release by the city does not always close the bond on the surety's books. Sureties typically want written evidence: the agency's release letter, the returned original bond or the certified-mail notice described in §66499.7(a). Until the surety receives that evidence, it may continue to bill renewal premium and count the bond against the developer's aggregate program.

Send the release documents to the surety as soon as they arrive, and confirm that riders reducing the bond amount after a partial release were issued and accepted by the agency. For multi-phase tracts, keep a schedule of every open bond by phase, obligee, current amount, acceptance date and warranty end date. That schedule is also what an underwriter asks for when the next phase needs new bonds.

How subdivision, permit and maintenance bonds weigh on a program is explained in [how open bonds hold surety capacity](https://mycontractorsinsurancequote.com/construction-surety-bonds/bonding-capacity).

## Before You Ask for a Quote

### What to Gather
- The subdivision improvement agreement and the city's acceptance and release procedure
- A written list of completed improvements with inspection sign-offs
- Engineer's cost estimates for any remaining work
- As-built drawings and closeout documents the city requires
- Unconditional lien releases from subcontractors and suppliers
- A schedule of every open bond with acceptance and warranty end dates

### What to Ask the Insurer or Surety
- What does the city need to issue its written notice of completion?
- Will the city run a partial release, and on what timeline under its ordinance?
- How much security will the city hold for the warranty period, and in what form?
- Who at the city signs release letters, and does the council need to act?
- What evidence does the surety need to exonerate the bond and stop renewal billing?

## Broker Notes

**Quick Answer:** Cities release performance security after accepting the work, payment security after the lien period, and warranty security after the warranty period ends.

**Common Mistake:** Treating a partial reduction as acceptance. The developer still carries risk of loss and maintenance until the city formally accepts the improvements.

**Broker Perspective:** Release letters often sit in a project file instead of reaching the surety, which keeps old bonds open on the developer's capacity and billing.

**Coverage Impact:** Delayed exoneration can limit the surety capacity available for the next phase, even when the earlier work is finished.

## Questions Buyers Ask

### Our streets are paved and inspected. Why hasn't the city released the bond?

In California, faithful performance security is released on completion and acceptance, and acceptance is a formal act by the agency or a delegated official. Inspections alone may not count. Ask whether the city has issued its written notice of completion and placed the release on the agenda, and confirm all closeout items it requires are in.

### How many times can we ask a California city for a partial bond reduction?

Government Code §66499.7 does not require the agency to run its statutory partial release process more than once between the start of work and completion and acceptance. The agency may allow additional partial releases if it chooses, so ask how its ordinance handles requests after the first one.

### What part of the security does the city keep after it accepts our improvements?

California agencies may keep an amount for the one-year warranty in Government Code §66499.9, plus amounts for costs and fees. Payment security is reduced to any recorded lien claims after the lien period, or released in full if none were recorded. The specific warranty amount and form depend on the agency.

### The city released our bond. Why is the surety still billing renewal premium?

The surety may not know the bond was released. Send it the city's release letter, the returned original bond or the certified-mail release notice. Most sureties close the bond only after receiving written evidence from the obligee, and until then it can also count against your aggregate bonding program.

## Official Sources

1. [NRS 278.380 (final map approval; improvement agreements and security)](https://www.leg.state.nv.us/NRS/NRS-278.html#NRS278Sec380), Nevada Legislature. Acceptance or rejection of dedications; requirement to improve or agree to improve; agreement secured by a good and sufficient bond or other security in an amount the local body determines; appeal under the NRS 278.3195 ordinance. Verified 2026-10-25.
2. [City of North Las Vegas, Surety Reduction and Release Process](https://www.cityofnorthlasvegas.com/home/showpublisheddocument/4771/638105071310730000), City of North Las Vegas Department of Public Works. Section 16.16.100 surety at construction cost plus 10 percent with 18-month completion; two reductions; 50 percent and 10 percent floors; 30-day decision and appeal; warranty from final release; $2,500 per lot damage bond or restrictive covenant; 180-day punch list rule. Verified 2026-10-25.
3. [Washoe County Subdivision Improvement Agreement (Washoe County Code 110), November 2023](https://www.washoecounty.gov/csd/engineering_capitalprojects/development_services/development_review_forms/wc_subdivision_improvement_agreement.pdf), Washoe County Community Services Department. Accepted guarantee forms; construction period up to 12 months and one-year extensions with replacement guarantee; reductions capped at 90 percent of completed work and 75 percent of the guarantee; one-year warranty after acceptance; liability regardless of ownership; recitals on completion before filing the plat. Verified 2026-10-25.
4. [Clark County Code Title 30, Unified Development Code, sections 30.04.08C.3, 30.04.08C.7 and 30.06.11 (effective version posted October 2026)](https://www.clarkcountynv.gov/adobe/assets/urn:aaid:aem:a5729074-902a-47c2-9b8c-5cb520f8f28d/original/as/OFFTitle30.EFF.10.7.2026.pdf), Clark County, Nevada. Security before map recording or permits; 100 percent bond or cash deposit; surety licensing, Circular 570 and A.M. Best requirements; cash limit; release on acceptance; one-time 80 percent subdivision reduction; cash installment releases with 10 percent retention; two-year completion and extension renewal; acceptance before final home inspections. Verified 2026-10-25.
5. [Cal. Gov. Code §66499.7 (release of improvement security)](https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=GOV&sectionNum=66499.7), California Legislative Information. Release on acceptance, documentary return or certified notice, partial release process with 45-day steps, 200 percent and 20 percent rules, reduction not acceptance, final release timing, payment security reduction, warranty exclusion Verified 2026-10-23.
6. [Cal. Gov. Code §66499.9 (warranty within performance security)](https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=GOV&sectionNum=66499.9), California Legislative Information. One-year warranty after completion and acceptance Verified 2026-10-23.
7. [Tex. Local Gov. Code ch. 212 (§212.0106, §212.901)](https://statutes.capitol.texas.gov/Docs/LG/htm/LG.212.htm), Texas Legislature. Municipal surety before plan approval; water and sewer bond conditioned on completion within time stated on plat Verified 2026-10-23.
8. [A.R.S. §9-463.01 (municipal subdivision regulation)](https://www.azleg.gov/ars/9/00463-01.htm), Arizona State Legislature. Municipalities require bonds or assurances by ordinance Verified 2026-10-23.

## Related Decisions

- [subdivision improvement bond requirements](https://mycontractorsinsurancequote.com/construction-surety-bonds/subdivision-improvement-bonds)
- [site improvement project coverage](https://mycontractorsinsurancequote.com/projects/subdivision-site-improvements)
- [developer insurance and surety](https://mycontractorsinsurancequote.com/who-we-serve/developers-subdividers)
- [project risks by construction phase](https://mycontractorsinsurancequote.com/resources/project-risks-by-construction-phase)

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