Ontario Regulation 461/24, enacted under the Planning Act sets out detailed provisions regarding the use of surety bonds in land use planning matters. This regulation aims to establish clear guidelines for the use of surety bonds as a means of securing obligations imposed by municipalities as a condition for land use approvals. The primary focus of the regulation is to ensure that municipalities are adequately protected against defaults in the performance of obligations related to land use planning.

The regulation defines certain key terms, including “business day,” which is specified as any day from Monday to Friday, excluding holidays defined under the Legislation Act, 2006. Under Section 2, it is stipulated that property owners and applicants seeking land use planning approvals may require a surety bond to be posted as a condition for the approval. This bond must meet specific criteria to be valid. Importantly, only insurers licensed under the Insurance Act to provide surety insurance are eligible. Moreover, these insurers must hold a minimum rating of “A” or higher from Dominion Bond Rating Service, “A-” or higher from Fitch Ratings, “A3” or higher from Moody’s Investors Service Inc., “A-” or higher from Standard & Poor’s, or “A-” or higher from A.M. Best Company, Inc.

Further, the regulation specifies the obligations and expectations for the bond. The primary requirement is that the bond guarantees payment to the municipality if the principal (the landowner or applicant) defaults on fulfilling the secured obligation. The municipality retains the sole discretion to determine if a default has occurred, which ensures it has control over recognizing potential breaches. When a default is determined, the municipality can demand payment from the insurer. This demand must be communicated in writing, including a notice of default that specifies the amount of money being sought. The insurer is then required to make the payment to the municipality without delay and within 15 business days after receiving this notice. Importantly, the insurer must comply with this demand regardless of any objections from the principal, and it cannot assert any defenses to avoid making the payment.

The regulation also provides conditions under which an insurer can terminate its obligations under the bond. This is not a simple process and includes multiple safeguards to ensure the municipality is protected. The insurer must give written notice of its intent to terminate its obligations, and this notice must be delivered to both the municipality and the principal at least 90 days before the intended termination date. Additionally, at least 30 days prior to this termination, the principal must deliver acceptable financial security to the municipality to replace the bond. This provision ensures that the municipality continues to have the necessary financial coverage even after the insurer’s obligations have ended.

The detailed requirements aim to protect municipalities by ensuring that financial obligations related to land use approvals are met even in cases of default.

Ontario (461/24) December 7, 2024