On September 16, 2024, the…

On September 16, 2024, the Provincial government released proposed regulation under s.70.3.1 of the Planning Act that would authorize landowners to stipulate pay-on-demand surety bonds to be used to secure municipal obligations that are conditions of land-use planning approvals.

The City has considerable concerns with accepting surety bonds in lieu of securities paid or secured via letter of credit as conditions of land use planning approvals. In the City’s experience, surety bonds have been challenging to draw upon and require substantial legal resources to administer, make claims and access funds. Based upon our experience, use of surety bonds would not achieve the intended outcomes and are likely to cause considerable delays and costs to all parties involved, including the landowner/developer, and will not support more timely reviews or the provision of additional housing.

Should the Province proceed with the development and implementation of a regulation enabling the use of pay-on demand surety bonds, the City of St. Catharines provides the following matters for consideration:

Implementation and Timing
As of October 11, 2024, Section 70.3.1 of the Planning Act is in effect and once the associated Minister’s regulation comes into force and effect, the municipality would be required to accept a pay-on-demand surety bond as a financial assurance to secure municipal land-use planning obligations. The proposed regulation (ERO 019-9198) provides an ‘Analysis of Regulatory Impact’ which indicates that there would be some financial and time costs to the municipality relating to drafting policies on pay-on-demand surety bonds.
- The City recommends that prior to implementing the Minister’s regulation, a transition period of at least six months is allocated to allow Municipalities to prepare these policies before a landowner could choose to provide a pay-on-demand surety bond. Providing this time will ensure the learning, policies, procedures, and documentation required to implement the Minister’s regulation can be addressed before use of the regulation and ensures no unnecessary delays to the review and approval process.
- It would be helpful if the Province could provide guidance on what a municipality may or may not require in their own policies relating to pay-on-demand surety bonds.

Process for Payment
In the City’s experience there is a substantial and litigious procedure involved with making claims and accessing funds. The proposed regulation indicates payment on demand would be guaranteed and would be required to be paid within 15 business days of being issued a written notice of default. It appears as though the process for payment would be addressed administratively between the landowner/developer, municipality and a surety, however that has not been the City’s experience. Previous attempts to draw upon surety bonds have required legal action and insufficient funds have been collected to finalize obligations. It is the City’s experience that drawing upon surety bonds have not made the municipality whole and is not a process that is in the public interest, particularly where alternatives (such as letter of credit) exist.
- It would be helpful if confirmation or assurance could be provided that the process is not intended to require substantial legal proceedings, ultimately costing the municipality, community, and developer significant time and costs.

Cancellation
The proposed regulation indicates the insurer would be required to provide a written notice to both the municipality and the principal a minimum 90 days ahead of its intention to terminate the surety bond and then the landowner subsequently has 60 days to provide a replacement. If a replacement is not provided, the existing surety bond would remain in full force.
- If the landowner does not secure a replacement surety bond within the 60 days, whose responsibility would it be to notify the existing insurer and what is the process?
- What prevents the insurer from cancelling the existing bond after the 90 days?

In addition to the above, the City of St. Catharines was circulated a memo from the Town of Grimsby regarding ERO 019-9198. The memo (attached) will be included in the agenda package for the Council meeting of October 21, 2024. The City echoes the comments and questions shared in the memo from the Town of Grimsby.

If you have any questions on the comments provided, please contact Taya Devlin, Senior Planner at tdevlin@stcatharines.ca or 905.688.5601 extension 1709.