Security required under the guarantee plan for new residential buildings

Housing units subject to Regulation on the guarantee plan for new residential buildings benefit from warranty coverage offered by the administrator, who assumes each and every one of the contractor's commitments under the approved plan¹. The guarantee plan therefore constitutes a regulated and mandatory guarantee of some of the obligations of the contractor towards the beneficiary, who will be compensated in the event of default by the contractor within the limits of the Regulation.

The Regulation provides general membership conditions for an entrepreneur who wishes to be accredited under a guarantee plan. One of the financial conditions consists in the granting of a bond to the administrator so that, if the latter must disburse amounts in order to compensate a beneficiary in the event of default by the contractor, the reimbursement of the amounts disbursed can be obtained from the said guarantee.

Conditions by type of business

According to the Regulation², entrepreneurs are divided into two groups, which must meet the following bond requirements:

• Type A business³ : hold a bond with a minimum value of $70,000 or $100,000 if she holds license sub-category 1.1.2
• Type B business⁴ : hold a bond with a minimum value of $55,000 or $70,000 if it holds license subcategory 1.1.2.

It should be understood that this is a minimum requirement and that the requested value could be higher than that mentioned above if the administrator has reason to believe that the solvency of the company requires it.⁵.

Bail required

According to case law, the question of the required bond may be submitted to the jurisdiction of an arbitrator, considering that the legislator has entrusted the arbitrators with the task of deciding any question relating to membership.
of the entrepreneur and that the bond is a condition sine qua non for membership⁶. Moreover, in the past, some contractors contested the value of the bond required by the administrator, obtaining, in some cases, a reduction in the requested value ordered by the arbitrator⁷.

In conclusion, it should be noted that for both Type A and Type B businesses, the bond offered must be in accordance with one or other of the forms provided for in the Regulation, namely in the form of a personal bond, letter of guarantee, mortgage guarantee or guarantee from a third party. Since the Regulations do not indicate any preference in this regard, we can assume that the choice will be that of the contractor. In any event, regardless of the form chosen, the administrator will probably not release the bond until the guarantees granted have expired.

DID YOU KNOW THAT?
A contractor's membership ceases to have effect as soon as he no longer holds the appropriate contractor's license issued by the Régie du Bâtiment du Québec.

1. Article 74 of the Regulation on the guarantee plan for new residential buildings.
2. Articles 84 and 85 of the Regulation.
3. Company working, partially or exclusively, in the field of residential building construction for less than 4 years.
4. Company working, partially or exclusively, in the field of residential building construction for at least 4 years.
5. Article 88 of the Regulation.
6. Jad Real Estate Group Inc. and Garantia Abritat Inc., Me Karine Poulin, Arbitrator, Customized Arbitration and Mediation Group (GAMM), 2015-16-001, A210883, 211391 and 211393, 211391 and 211393, 2016-07-93, 2016-07-25, 2016-07-25 (decision corrected on 2016-08-15).
7. For this purpose, see in particular 8254389 Canada Inc. and Garantie Abritat Inc., Me Jeffrey Edwards, arbitrator, Customized Arbitration and Mediation Group (GAMM), 13-074LS, 2013-15-002 and 13 185-002 and 13 185-002 and 13 185-103, 2013-09-26.

Consult the source publication