The City of Vancouver (the “City”) has expanded the use of surety bonds as security for development-related obligations as part of a broader initiative to support development viability and housing delivery. While the City has not yet issued a standalone policy, in June 2025, City staff released a report entitled “Supporting Development Viability and Unlocking New Housing Supply”, which recommended expanding the use of pay-on-demand surety bonds to secure certain infrastructure and amenity obligations and support new Development Cost Levy (“DCL”) and Community Amenity Contribution (“CAC”) deferral programs.
Since then, the City has amended its template rezoning services agreements to expressly permit the use of irrevocable, pay-on-demand surety bonds in defined circumstances. These amendments provide the clearest indication of how the City intends to implement its expanded surety bond framework in practice.
For developers navigating large infrastructure obligations or capital‑intensive projects, this change may offer meaningful flexibility and cost savings.
How Surety Bonds Differ from Letters of Credit
Letters of credit typically reduce available credit and can affect overall project financing and lender covenants. Surety bonds, by contrast, are often treated as contingent obligations and may preserve liquidity and borrowing capacity, particularly on large or multi‑phase projects. Specifically, the lending institutions that issue letters of credit often require that they be secured by cash on a dollar-for-dollar basis as well as the payment of a percentage based annual fee, whereas surety bonds are generally maintained only by payment of an annual fee.
The availability of surety bonds at a lower cost and on less cumbersome terms makes them an attractive option for developers.
The Shift from Letters of Credit to Surety Bonds
Historically, the City has relied almost exclusively on cash deposits or irrevocable letters of credit to secure an owner's obligations relating to off-site works, deferred works, and warranty obligations arising from rezonings. Cash deposits have been phased out, but letters of credit remain familiar and effective from the City's perspective, although they can significantly constrain a developer's borrowing capacity and liquidity.
Recent amendments to the City's template services agreements now expressly contemplate the use of irrevocable, pay-on-demand surety bonds as an alternative form of security. These amendments appear in services agreements entered into in early 2026 and signal a clear evolution in the City's standard approach to development security requirements.
When Can Surety Bonds Be Used?
Under the revised agreements, an owner may satisfy certain security requirements using either a letter of credit or a surety bond, but only in prescribed circumstances and subject to City discretion. The Director of Finance must approve the use of a surety bond instead of a letter of credit, and that approval may be withheld.
The revised agreements also impose minimum threshold amounts. In the absence of a formal City corporate policy on surety bonds, such bonds are generally accepted only where the required security is at least $5 million, or $3 million where the owner is also providing an in‑kind amenity secured by a separate agreement and the City’s total cumulative exposure is at least $5 million.
The Use of Surety Bonds in Development Cost Levies and Community Amenity Contributions
In connection with the June 2025 report, City council approved a DCL installment payment program that allows eligible projects with DCLs exceeding $500,000 to pay DCLs in three equal installments rather than in full before building permit issuance. Deferred amounts may be secured by either a pay-on-demand surety bond or a letter of credit, at the City’s discretion.
The City has also expanded eligibility for CAC deferrals by lowering the upfront payment requirement at rezoning enactment. Under the revised framework, the City may, in its discretion, permit the deferral of cash CAC amounts exceeding $5 million, reducing the previous threshold of $20 million. The first $10 million of any deferred CAC may be secured by a pay-on-demand surety bond, while amounts exceeding $10 million may be secured through a combination of pay-on-demand surety bonds and letters of credit. These changes further demonstrate the City’s increasing willingness to utilize surety bonds and provide greater flexibility for developers managing significant project costs.
Impact on Developers
The express incorporation of surety bonds into the City's template rezoning services agreements reflects a meaningful evolution in City practice, even without a published corporate policy. Together with the City's DCL and CAC security reforms, the amended agreements demonstrate a clear shift toward greater acceptance of surety bonds as part of the City's development security framework. Developers negotiating rezoning conditions should now consider, at an early stage, whether a surety bond may be a viable alternative to a letter of credit, particularly where required security levels are substantial.
Although the City has not yet released formal guidance on the use of surety bonds, the new measures and the consistent appearance of these provisions in recent services agreements suggest that more formal City policy direction may soon be forthcoming. Until that occurs, the amended agreement language itself provides the clearest indication of how and when surety bonds may be employed within the City’s development security framework.
If you have any questions regarding this topic, please contact a member of our Real Estate Group.