How Ontario, BC and Alberta municipalities accept pay-on-demand surety bonds instead of letters of credit to secure development and subdivision agreements.
Education only / verify at source / not legal or financial advice. This guide explains how Canadian municipalities secure the works a developer promises in a subdivision, site plan, servicing or development agreement, and where provincial rules or city policies let that security take the form of a surety bond instead of a letter of credit. It relies on statutes, regulations, municipal policies and published bond templates. Global Guarantors publishes industry education. We aren't a surety, broker, bank, municipality or law firm, and we don't publish premiums, rates or quotes. Your agreement, your municipality's current template and your own counsel control over anything here.
Start here: Surety 101: three parties, one written promise · Surety glossary · Surety vs insurance + indemnity
Before a new subdivision gets its roads, sewers, watermains, sidewalks, streetlights and parks, the developer signs an agreement with the municipality promising to build them to municipal standards and maintain them until the city takes them over. The municipality asks for security behind that promise, sized to the cost of the works, so that it can finish the job with someone else's money if the developer doesn't.
For decades the usual answer in Canada was an irrevocable letter of credit from a bank. That is changing. Ontario made a surety bond the landowner's choice for planning-approval security on November 20, 2024. British Columbia did the same for instalment security on development cost charges on January 1, 2026. And cities from Brampton and Oakville to Burnaby, Calgary and Edmonton now publish their own development bond templates.
This guide covers what the security does, why letters of credit dominated, what Ontario's regulation requires, and where British Columbia and Alberta stand. It sits within our contract surety guides, alongside performance and payment bonds for construction contracts.
A development agreement turns a planning approval into built infrastructure. Names vary (subdivision, site plan, servicing or development agreement), but the structure is similar.
| Stage | What the developer promises | What the security does |
|---|---|---|
| Approval | Sign the agreement and deliver security | Gives the municipality a funded remedy from day one |
| Construction | Build the works to municipal standards | Funds completion if the developer defaults |
| Partial completion | Finish stages of the works | Reduced as completed work is accepted |
| Maintenance | Repair defects during the maintenance period | A residual amount stays in place |
| Assumption | Hand the works over | Released once the municipality assumes them |
Any instrument a municipality accepts has to last as long as the obligation, often several years from first servicing to assumption, and has to allow reductions and partial draws without being renegotiated.
This security runs from the developer to the municipality. It is separate from the performance and labour and material bonds a servicing contractor may give the developer, and from statutory rules such as Ontario's construction holdback that apply to that construction contract.
Ontario's consultation notice described the starting point for planning-approval security: "Typically, this financial assurance takes the form of a Letter of Credit (LOC) issued by a bank."
A letter of credit suits a municipality because it is a bank's promise to pay against a written demand, without the municipality having to prove a default first. A conventional construction surety bond works differently. Surety Canada's information paper comparing the two describes surety bonds as "on default" instruments: the obligee must show a default before the surety's obligation to act arises.
From the developer's side, the cost of a letter of credit is mainly the credit it consumes. Surety Canada puts it this way for contractors: "An ILOC reduces a contractor's line of credit which can cause cash flow issues during a project." Ontario's proposal made the same point for homebuilders, stating that instruments "such as LOC s, which municipalities generally require to secure homebuilder obligations when building communities, tie up the homebuilder's capital that could otherwise be invested in additional home-building projects".
The City of Markham's December 3, 2024 staff report captured both sides. It observed that "Landowners obtaining development approvals with the City, usually secure their obligations for engineering works, urban design, planning, waste and fire with Letters of Credit (LCs)." It also recorded the City's earlier hesitation about bonds, which was "the ability to draw funds on demand, without the need to justify to the bond company the reason the funds are required or prove default under the secured agreement, before the demand for payment is accepted."
The answer was a hybrid: a surety bond written to pay on the municipality's demand, like a letter of credit. That pay-on-demand bond is what the Ontario and British Columbia rules describe. For how demand wording differs from conditional surety wording in other settings, see our guide to on-demand bonds vs conditional surety.
The statute. Bill 109, the More Homes for Everyone Act, 2022, added section 70.3.1 to the Planning Act. It lets the Minister make regulations "authorizing owners of land, and applicants for approvals in respect of land use planning matters, to stipulate the specified types of surety bond or other instrument to be used to secure an obligation imposed by the municipality, if the municipality requires the obligation to be secured as a condition to an approval in connection with land use planning".
The regulation. O. Reg. 461/24 was filed and came into force on November 20, 2024. Its core rule is short: "Owners of land and applicants for approvals in respect of land use planning matters may stipulate that a surety bond described in subsection (2) is to be used to secure an obligation imposed by the municipality that is required to be secured as a condition to an approval in connection with land use planning."
The choice belongs to the owner or applicant. The regulatory impact statement in the government's September 2024 proposal says the proposed regulation "does not require landowners and municipalities to use pay-on-demand surety bonds. However, if a landowner chooses to provide a pay-on-demand surety bond… then a municipality would be required to accept this instrument". The bond has to meet the terms below.
| Requirement in O. Reg. 461/24, s. 2(2) | What it says |
|---|---|
| Issuer | An insurer "licensed under the Insurance Act to write surety insurance", with a minimum rating from one of five named agencies |
| Default | The municipality "may, in its sole discretion, determine that the principal has defaulted" |
| Demand | A written declaration and notice of default to the principal and insurer, stating the amount demanded |
| No defences | Payment "will be made, notwithstanding any objection by the principal, and the insurer will not assert any defence or grounds of any nature or description for not making the payment" |
| Timing | Payment "within 15 business days after the notice" is given |
| Termination | At least 90 days' written notice from the insurer; the principal must deliver replacement security at least 30 days before termination |
| Reductions | The bond must state that its amount can be reduced and the conditions for a reduction |
The rating floors are one of DBRS "A", Fitch "A-", Moody's "A3", S&P "A-" or A.M. Best "A-". The government lowered the A.M. Best floor from "A" in the September 2024 proposal to "A-" in the final rule, after feedback that "A" "would disproportionately favour insurers from outside of Canada". We explain how rating floors like these work, and what an outlook change does and doesn't mean, in a separate guide.
Two scope points. The regulation covers obligations secured as a condition of a land-use planning approval, such as subdivision and site plan conditions; it is not a construction contract bond rule. And it sets minimum terms, not a standard form, so each municipality uses its own template.
Municipal templates show how the regulation reads in an actual bond. Brampton's public template is dated March 2026; Oakville's is also public.
| Feature | Brampton template (March 2026) | Oakville template |
|---|---|---|
| Default trigger | Obligee determines default "in its sole and absolute discretion" | Oakville determines default "in its sole discretion" |
| Payment period | Fifteen business days after receipt of a Demand | Fifteen business days after receipt of a Demand |
| Defences waived | Including "that a default has not occurred" and any insolvency of the Principal | Including "that a default by the Principal has not occurred" and that the Principal no longer owns the lands |
| Multiple demands | "The Obligee may make multiple Demands under this bond." | "Oakville may make multiple demands under this Bond." |
| Reductions | By written notice from the Obligee | Partial reductions at Oakville's discretion as works are completed |
| Replacement on termination | Replacement security "not less than sixty (60) days prior to the termination" | Replacement security "not less than thirty (30) days prior" to termination |
| Surety failure | Principal assumes "full, direct and unconditional liability" if the surety becomes insolvent or unable to pay | Bond "constitutes a primary obligation" of the surety |
The demand is the trigger. Brampton's bond says a Demand in the prescribed form "shall be accepted by the Surety as conclusive evidence of its obligation to make payment". Oakville's bond calls itself "irrevocable, unconditional and constitutes a primary obligation". These instruments are designed to be paid first and argued about later, between the developer and the municipality.
Templates differ in detail. Brampton's 60-day replacement period is longer than the regulation's 30-day minimum, and its surety-failure clause goes beyond the regulation. Compare each template against O. Reg. 461/24 and the agreement it secures.
Not every obligation is a candidate. Markham's 2024 report said bonds "will not be used to secure development charge payments", and that letters of credit would continue to be used for smaller obligations such as infill housing and pool construction. Check what your municipality's policy covers.
Development charge instalments. Under B.C. Reg. 166/84, the Development Charge (Instalments) Regulation, a developer can pay development cost charges, amenity cost charges and school site acquisition charges in instalments. It pays one quarter at subdivision approval or building permit, and must deposit security for the balance. B.C. Reg. 99/2025, effective January 1, 2026, rewrote section 7 to list "an on-demand surety bond of an insurer that has a business authorization issued under the Financial Institutions Act" alongside an irrevocable letter of credit and an assigned security.
A financial officer may decline security that may not be recoverable, but not a bond that meets these criteria:
Servicing agreement works. The Local Government Act lets local governments require works and services for subdivisions and building permits. Where it names security forms (land use permits, section 502), it lists an irrevocable letter of credit or "the deposit of securities in a form satisfactory to the local government", and doesn't mention surety bonds. Bonds for servicing works are a matter of city policy.
| Municipality and policy | What bonds can secure | Notable conditions |
|---|---|---|
| Surrey: Policy Q-29 (approved July 13, 2026) | Development charge instalments | Provincial rating floors; no expiry date; Surrey's template |
| Burnaby: Acceptable Surety Bonds (January 22, 2026) | Servicing and access and works agreements; charge instalments | Surety Association of Canada membership; servicing bond pays in ten business days; City "may in its sole discretion, decline a Surety Bond for any reason" |
| Richmond: Bulletin DEVAPPS-20 (revised December 17, 2025) | Charge instalments; landscape, tree and servicing works (pilot) | $50 million aggregate cap, four bonds per developer; A.M. Best A+ for works securities |
| Vancouver: news release on council actions (June 17, 2025) | Deferred community amenity contribution balances; wider use in place of letters of credit | Governed by the Vancouver Charter, not the Local Government Act. The release lists "Expanded use of surety bonds", under which developers "would be able to use pay-on-demand surety bonds as an alternative to letters of credit"; check the City's adopted policy |
Alberta has no provincial regulation equivalent to Ontario's or British Columbia's. Under the Municipal Government Act, a subdivision authority may require the applicant to enter into an agreement with the municipality to build roads, walkways and utilities, pay levies, and "to give security to ensure that the terms of the agreement under this section are carried out" (section 655(1)(b)(vi)). Section 650 allows the same kind of agreement, including security, as a condition of a development permit. The Act doesn't specify the form of security, so each municipality sets its own list.
Calgary. The City's development agreements page says it "only accepts two (2) forms of security": a digital letter of credit or a surety bond on the City's Development Agreement Surety Bond form. That form (revision R2019-04) requires the surety to pay amounts demanded "within seven (7) business days" after receiving a Statement of Claim. The surety and principal "expressly waive any defence that the Principal is not in default". The 2026 standard terms, like the 2025 edition, also require the City to notify the issuing surety at the same time as it notifies the developer of a default, where security is a bond.
Edmonton. Edmonton's Guidelines for Establishing Security in Servicing Agreements (Subdivisions), effective April 1, 2025, list a "Development Bond" as acceptable security. The bond started as a five-year pilot in 2020 and is now a standard option. Its requirements:
Edmonton also converts existing letter-of-credit security to development bonds for servicing agreements signed after January 1, 2014 that are in good standing.
Both Alberta forms pay faster than Ontario's 15 business days.
The rules and forms covered above, in one view.
| Province | Provincial rule and who chooses | Payment period and rating floor |
|---|---|---|
| Ontario | O. Reg. 461/24 (November 20, 2024); the owner or applicant chooses | 15 business days; floors set in O. Reg. 461/24 (above) |
| British Columbia | B.C. Reg. 166/84 s. 7 (January 1, 2026), charge instalments only; the developer chooses for charges, city policy governs works | 15 business days for charges, city forms vary; floors higher than Ontario's except AM Best A- (charges) |
| Alberta | No provincial bond rule; each city lists the forms it accepts | Calgary and Edmonton forms: 7 business days; floors set by each city |
Other provinces and territories are not covered here.
The three instruments differ most in who carries the risk of a disputed default and whose credit is used.
| Instrument | Trigger and defences | Issuer, credit and recovery |
|---|---|---|
| Pay-on-demand development bond | Municipality's written demand and declaration of default; defences waived by the bond wording | Licensed, rated surety insurer; doesn't draw on the bank line; the surety recovers from the developer under its indemnity agreement |
| Conditional (on-default) surety bond | Proven default under the underlying contract; the surety may raise the principal's defences | Licensed surety insurer; doesn't draw on the bank line; the surety recovers under its indemnity agreement |
| Irrevocable letter of credit | Demand that complies with the letter's terms; generally no defences for a complying demand | Bank or other regulated lender; reduces available bank credit; the bank recovers under its credit agreement |
The recovery point is easy to overlook. A pay-on-demand bond changes where the credit sits, not who ultimately pays: the surety pays the municipality, then looks to the developer and any indemnitors, and underwrites them before it issues.
The same comparison comes up outside development approvals. We cover it for federal broadband grants in ReConnect: bond vs letter of credit, and the same trade-off arises when utilities ask for collateral.
United States, briefly. US local governments have long accepted surety bonds for subdivision improvements, under state subdivision laws and local ordinances. California's Subdivision Map Act is a clear example. Government Code §66499 lists "Bond or bonds by one or more duly authorized corporate sureties" first among acceptable improvement security, alongside cash deposits, instruments of credit and letters of credit, and liens in some cases. The choice is "at the option of and subject to the approval of the local agency". Unlike Ontario's and British Columbia's rules, the section doesn't prescribe pay-on-demand terms; the bond form is set locally. Rules vary by state and locality, so read the ordinance and the form that apply.
Form and scope
Surety and terms
Jurisdiction
Can an Ontario municipality refuse a surety bond for subdivision security? If the owner or applicant stipulates a bond that meets O. Reg. 461/24 for an obligation the municipality requires to be secured as a condition of a planning approval, the regulatory impact statement in the government's 2024 proposal says the municipality "would be required to accept this instrument". A bond that doesn't meet the regulation's terms isn't covered.
Is a development agreement bond the same as a performance bond? No. A construction performance bond usually responds to a proven contractor default under a construction contract. A development agreement bond secures a developer's promises to a municipality, and in Ontario, British Columbia and the Alberta city forms covered here, it pays on the municipality's demand.
How fast must the surety pay? Within 15 business days of a compliant written demand under Ontario's regulation and BC's charge-instalment rule. Calgary's and Edmonton's forms say seven business days, and Burnaby's servicing bond ten.
Does the developer still owe the money if the surety pays? Yes. The surety pays the municipality and then seeks reimbursement from the developer and any indemnitors under its indemnity agreement. Brampton's template also says nothing in the bond limits the principal's liability under the agreement.
Can the bond be reduced as work is completed? Ontario's regulation requires the bond to state that the amount can be reduced and the conditions for doing so. Brampton's and Oakville's templates reduce the bond by written notice from the municipality, and Oakville ties partial reductions to completed works.
Does British Columbia require cities to accept bonds for servicing agreements? No provincial rule does. B.C. Reg. 166/84 limits a financial officer's discretion only for qualifying bonds securing development charge instalments. Servicing agreement acceptance depends on city policy, as in Burnaby, Richmond and Vancouver.
Retrieved or confirmed October 27, 2026 (PT), except where noted; re-checked November 1, 2026 (PT).
