Labour and Material Payment Bonds

Under the standard Canadian form, only parties with a direct contract with the bonded contractor — its subcontractors, its suppliers, its equipment rental firms, its labour suppliers. A sub-subcontractor, or a supplier to a subcontractor, is second tier and has no claim under that form at all. Some other forms reach further: the federal payment bond extends to claimants contracting with the principal or any subcontractor of the principal, and Ontario’s public-sector form also reaches the second tier. Which form is on your job decides whether you are covered.

It is priced as a pair with the performance bond, on a rate per thousand dollars of contract value that declines as contract size rises. The two together commonly come to around one percent of the contract price, with stronger contractors rated better. Premium is adjusted on the final contract price, so increases attract additional premium and reductions can produce a refund.

A qualifying claimant serves a written notice of claim on the surety, with copies to the contractor and the owner, using the form prescribed in the bond. The surety must acknowledge within three business days and ask for the documents it needs. It then has to state its position — no later than ten business days after it receives that information, and in any event no later than twenty-five business days after the notice. Undisputed amounts are payable within ten business days of that position.

Notice must be given within 120 calendar days. For holdback, that runs from the date you should have been paid in full under your contract with the bonded contractor. For everything else, it runs from the date you last performed labour or supplied material. Those are two separate clocks on the same debt, and timely notice is a condition precedent — miss it and there is no claim, however good the debt.

Suit is a different clock again: one year from the date the contractor last performed work on the contract, including warranty work. Note that trigger carefully — it is an event on someone else’s contract, not yours.

No. It is a requirement of the owner’s procurement rather than of general law, and requirements differ by owner and province. It is standard on public construction and common on institutional, lender-financed and larger private work. Some provinces mandate it above a stated contract value for public work; the Atlantic provinces set it through tender documents and procurement policy. Read the tender.

You do not apply bond by bond. You establish a bonding facility with a surety through a broker, and once it is in place the payment bond is issued at award as a matched pair with the performance bond. Our bid bonds page sets out what a surety underwrites, what documents you will need, and how single-job and aggregate limits are set.

Ask, in writing, before you mobilise — from the general contractor and from the owner. Do not wait to be told: the current standard form expressly removes any duty on the owner to notify you that a bond exists. In Nova Scotia there is a stronger route. The Builders’ Lien Act entitles a lien claimant to demand, in writing, a copy of any labour and material payment bond posted in respect of the contract, and it must be produced within 21 days, with a costs sanction for refusal. The simplest long-term fix is a clause in your own subcontract requiring a copy of any bond to be delivered on execution.

Yes. They are independent remedies — one arises from a contract of suretyship, the other from statute — and pursuing one does not extinguish the other. You can only recover once, and a surety that pays is subrogated to your rights. The practical sequencing point is that lien deadlines are usually the shorter ones, so protect the lien first and then serve the bond notice.

Different bonds, different beneficiaries, different triggers and separate limits. The performance bond protects the owner and responds when the contractor defaults in the work. The payment bond protects trades and suppliers and responds when the contractor does not pay them. A subtrade cannot claim on a performance bond, and an owner does not use a payment bond to get the job finished.

Use the notice form prescribed in the bond and serve it on the surety with copies to the contractor and the owner. Send the executed subcontract or purchase order, all change orders, invoices and progress billings, a statement of account, proof of payments received, the outstanding amount including HST, and — the document claimants most often lack — proof of your final date of supply, such as delivery slips or signed tickets. Add a statutory declaration on payment of your own subtrades, a copy of any lien filed, a current workers’ compensation clearance, and a copy of the bond itself.

Because the surety’s deadline to state its position runs from whichever comes first: ten business days after it receives the information it asked for, or twenty-five business days after your notice. A claimant who returns the document package promptly can compress the surety’s decision from twenty-five business days to as few as thirteen. There is also a queue effect — the bond amount is reduced by every payment made under it, so on a large default the slow claimants are the ones who find the pool short.

Yes. Rental equipment directly applicable to the contract falls within the definition of material, alongside water, gas, power, light, heat, oil, gasoline and telephone or digital service. Where the rent is being applied toward a purchase price, recovery is limited to the prevailing industrial rental value of the equipment for the period it was actually used on the job, judged by prevailing rates in the local equipment market. Note that the federal form takes a different approach and excludes rent-to-own arrangements outright.

This is where the payment bond matters most. On Crown and much public work a lien cannot attach to the land itself, and the claim collapses into a fight over holdback. A payment bond is unaffected by who owns the land — it is a promise from a solvent surety, not a charge on real property. On public projects the bond is frequently the primary remedy rather than the backup.

Yes. CCDC 222 was reissued in May 2024, its first update since 2002, alongside the bid and performance bond forms. The Surety Association of Canada is clear the risk profile did not change; what changed is the process. The claims protocol now carries prescribed forms and deadlines on the surety, the old rule barring a claimant from suing until 90 days after last working has been removed, digital service was added to the covered list, and the owner’s duty to tell claimants a bond exists was expressly negated.

Yes, and it must give specific reasons in its formal position. The bond is based on the underlying contract and governed by its terms, so the surety’s liability tracks what is genuinely owed. Common grounds are late notice, the claimant being second tier and therefore not a claimant at all, amounts not properly due under the subcontract, or a dispute about the work itself. Inflating a claim tends to delay payment of the part that was good.