On September 16, 2024, the Province of Ontario proposed a new regulation under the Planning Act that would authorize the use of pay-on-demand surety bonds (PSB) with prescribed features to secure development-related obligations.
Development approvals are often conditional on applicants/landowners (landowners) providing public infrastructure or other matters, typically secured through agreements and provision of funds to guarantee the completion of the works. PSBs serve as an alternative to letters of credit (LOCs or LCs), certified funds, and cash, the most common forms of development security, which may require that landowners have full amounts available upfront for municipalities to draw on directly. PSBs are expected to free up funds for homebuilders to build more homes.
The Province’s Broad Proposed Regulation
The proposed regulation, not yet filed, is the Province’s first under new regulation-making powers granted to the Minister of Municipal Affairs and Housing through Bill 109, the More Homes for Everyone Act, 2022 (Bill 109).
The power allows the Minister to make regulations authorizing landowners “in respect of land use planning matters” to utilize prescribed types of surety bonds or other instruments to secure an obligation that a municipality imposed as a condition to an approval in connection with land use planning. The power also allows the Minister to specify any circumstances in which the landowner can exercise the authority.
Section 70.3.1 of the Planning Act, which authorizes the regulation, was proclaimed into force in October 2024.
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