Surety Bond for Urbanization Charges and Construction Costs – Bucalossi Law

Are you the owner of a construction company tasked with building a public work in your city, perhaps a school or a parking lot?

Are you ready to start construction?

Wait, first you must necessarily enter into a surety bond for the payment of urbanization charges.

Have you already considered all the bureaucratic aspects?

Have you thought about the necessary financial guarantees?

Law 10/1977, also known as the Bucalossi Law, named after the Minister who drafted it, is the law that establishes all the regulations and obligations concerning land buildability. . These obligations are identified in:

  • Contribution to be paid to the Municipality in relation to primary and secondary urbanization charges
  • Obligation to directly carry out the urbanization works
  • Contribution to be paid to the municipality commensurate with the construction cost, consequently, at the time of granting the building permit, the concessionaires may be required to provide the following guarantees also through a surety bond to obtain the deferment of payment.

 

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+39 055 28.53.13

+39 02 667.124.17

Email: info@italiafideiussioni.it

 

The Surety Bond for urbanization charges, therefore, is a guarantee requested by the Municipality, Province, or Region for its benefit to ensure the fulfillment of the charges, or the contributions for the realization of primary or secondary urbanization works:

Primary urbanization charges are all the works needed to make an area buildable which will subsequently be of public utility. Examples of these include roads serving settlements, spaces designated for parking, sewers, water pipes, the electricity distribution network, green spaces, the gas network, the telephone network, and public lighting, and in general, everything necessary for the functioning of one or more properties planned in a certain area.

Secondary urbanization charges, on the other hand, constitute those urban services that serve the normal functioning of social and community life such as kindergartens, daycare centers, compulsory schools, markets, religious buildings, and all those services that are part of the territorial needs of an area.

The construction company that has built buildings in a certain area, in addition to the construction of the buildings themselves, must also take on the expense of the urbanization charges essential for the functioning of an inhabited area.

The construction company must declare to the municipality the total expense of the urbanization charges to be built, and the municipal entity requests a surety bond that the builder must provide as a guarantee of the successful completion of the primary urbanization works.

Usually, the municipality can request a guarantee on the total amount of urbanization charges or only on that part of the amount that the builder due to lack of liquidity cannot immediately cover.

In case of a claim, i.e., if the builder fails to meet the obligations agreed upon in the surety bond, the company that issued the surety bond guarantees payment to the municipality of the amount required in place of the builder.

The duration of the guarantee depends on the duration of the agreement signed with the Municipality, Province, or Region, usually a minimum of 3 years.

Contact us via WhatsApp: +39 339.71.50.157 – we will respond during office hours, within 5 minutes.

Contact us directly online for an immediate response, or call one of our nearest offices. Tel. +39 055 28.53.13 –Tel. +39 02 667.124.17

Email : info@italiafideiussioni.it

The surety bond for urbanization charges and the surety bond for deferment of construction charges are essential tools for those involved in construction works in Italy.

These surety bonds are requested by the Municipality as a guarantee to those who want to start a construction project, whether it’s an extension or a new build.

The building permit includes two main aspects:

  1. A bond related to urbanization charges and the contribution for the cost of construction.
  2. The direct realization of works to offset the concession charges.

The surety bond can take various forms, such as that for urbanization charges or that for building concessions. Both terms are part of the contractual language in the construction field and are crucial to ensure compliance with commitments.

In practice, if a company in the construction sector decides to build a property, it must take responsibility for the charges related to urbanization. The Municipality, to ensure the payment of these charges, requires a specific surety bond.

To better understand:

  • Primary Urbanization Charges: refer to the essential services that make an area buildable and of public interest. Examples include the creation of sewers, roads, parking lots, and networks for distributing water and gas.
  • Secondary Urbanization Charges: concern works that facilitate social and community life. For example, the construction of public utility structures such as schools or hospitals.

In summary, the surety bond for urbanization charges guarantees the Municipality the fulfillment of the commitments made by the concession holder, ensuring that the planned works are actually carried out and that the charges are paid.

 

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What are Construction Charges?

Construction charges represent a series of financial contributions that private individuals or construction companies are required to pay to the Municipality when they carry out new constructions or expand existing buildings within the municipal territory.

These charges are provided for by Italian legislation to contribute to the financing of infrastructure and public services necessary to support new urban developments or increases in housing density.

The reference legislation for construction charges is contained in Legislative Decree No. 380/2001 380/2001, 1, known as the “Consolidated Text of legislative and regulatory provisions in building matters” (T.U. Edilizia).

The calculation and application of construction charges can vary from one Municipality to another, as it is up to the individual Municipalities to define, through specific regulations, the calculation methods and criteria for determining these charges themselves.

In general, construction charges are divided into:

  1. Urbanization charges: These are intended to cover the costs of primary urbanization works (such as roads, sewers, public lighting) and secondary urbanization works (such as parks, schools, sports facilities).
  2. Construction cost: This represents the financial contribution due for the construction of buildings and is calculated based on the market value of the construction cost per square meter in the area where the intervention is carried out.

To determine the amount of charges to be paid, it is necessary to refer to the municipal regulations of the Municipality where the building intervention is intended to be carried out, since each Municipality may have specific rates and calculation methods. Moreover, it is always advisable to consult a technician or a professional in the field to get an accurate estimate of the charges due for a specific intervention.

The Surety Insurance can be issued by an insurance company authorized to issue bonds in Italy or by a Bank.

Contact us via WhatsApp: +39 339.71.50.157 – we will respond during office hours, within 5 minutes.

Contact us directly online for an immediate response, or call one of our nearest offices. Tel. +39 055 28.53.13 –Tel. +39 02 667.124.17

Email : info@italiafideiussioni.it

 

What are the differences between Surety Insurance and Bank Surety for Italian companies?

Surety Insurance vs Bank Surety: The Advantages for Italian Businesses

In the Italian economic context, a surety is an essential tool to guarantee the contractual obligations of one party towards another. Typically, this guarantee is provided by a bank or an insurance company. Although both types of surety have the same objective, there are significant differences between the two, with particular advantages offered by surety insurance over bank surety.

1. Impact on Business Credit: One of the main advantages of surety insurance over bank surety concerns the impact on the business’s credit lines. When a bank issues a surety, the guaranteed amount is usually deducted from the business’s credit ceiling, thus limiting the financial resources available for other needs. On the other hand, surety insurance does not affect the bank credit lines, allowing businesses to maintain greater liquidity and financial flexibility.

2.Costs and Conditions: In general, insurance companies tend to offer more competitive conditions than banks. This is partly due to the different nature of the risk assumed and the evaluation practices. While banks focus primarily on the financial solidity of the business, insurance companies can have a more flexible approach, evaluating other factors such as the history, reputation, and experience of the business in its sector. This can result in lower insurance premiums compared to the costs of bank sureties.

3.Contractual Flexibility: Insurance companies often offer greater flexibility in terms of contractual conditions. This means that the surety can be customized according to the specific needs of the business, adapting it to the particulars of the contract or project that it intends to guarantee. On the other hand, banks tend to have more standardized conditions and less adaptable to individual cases.

4. Duration and Renewal: While bank sureties often have limited durations and require frequent renewals, insurance sureties can be stipulated for longer periods. Moreover, the renewal process can be simpler and less costly with an insurance company, reducing bureaucracy and waiting times for the business.

5.Solvency and Market Credibility: The insurance industry, regulated and monitored by specific entities, enjoys a solid reputation in terms of solvency. A surety issued by a renowned insurance company can thus increase the credibility of the business in the market, strengthening the trust of commercial partners and customers.

6.Assistance and Consulting: Insurance companies, specialized in risk management, can offer targeted consulting to businesses, helping them identify and mitigate potential risks associated with their contractual obligations. This type of support can be particularly valuable for businesses operating in complex or rapidly evolving sectors.

Although both surety insurance and bank surety have their place in the Italian economy, for many businesses, the former offers significant advantages in terms of costs, flexibility, and impact on credit. Considering the individual needs and the nature of their business, Italian companies would do well to carefully evaluate these differences when choosing the most suitable solution to guarantee their contractual obligations.

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