Pursuant to The Condominium Property Act, 1993 (the Act) and its Regulations,  it is acceptable  to use an irrevocable letter of credit as a form of security under the Act.

The Act makes security a requirement for:

• bare land condominiums when if there is common property left to be completed, 
• phased condominiums if additional units and common property are to be built in a later phase,
• for conversion units (where an existing building is being converting into condominiums for residential purposes, and
• where residential units are being created.

The purpose of security is to provide a remedy to the unit owners if the developer fails to complete the work as required.  A developer now has a choice of obtaining either a bond or an irrevocable letter of credit when security is required.

A new section 16.1 has been added to The Condominium Property Regulations, 2001 which states: 


16.1   A letter of credit must be:

(a)  irrevocable;
(b)  payable to the minister;
(c)  in an amount determined in accordance with subsections 17(1.1) and (1.2); and
(d)  in a form satisfactory to the minister. 
 
To be in a form satisfactory to the Minister of Justice, it has been determined that a letter of credit must: 

• be addressed to Minister of Justice
• be issued by any of the following:
  • Schedule I bank
  • Schedule II bank
  • Schedule III bank
  • Canadian incorporated trust company
  • Credit Union incorporated in Saskatchewan (confirmed by Credit Union Central)
• be on letterhead of the financial institution
• contain the full name and address of the financial institution
• contain the full name and address of the developer
• provide the plan # for parcel to be developed, parcel #
• contain the [C1] name of condominium development
• state the amount of letter of credit
• state that letter of credit is irrevocable up to expiry date
• contain an “evergreen clause”:

“This letter of credit shall be deemed to be automatically extended on an annual basis without any formal amendment unless 30 days prior to the present expiry or any future expiry date as automatically extended, we shall notify you in writing that we elect not to extend the letter of credit for any further period and at the same time forward to you, together with such written notice of election, a bank draft payable to the Minister holding the letter of credit in the amount of $ _________________ less any amount previously paid under this letter of credit.”

• state that the Minister is not required to present the original of the letter of credit to receive payout
• agree to pay to Minister a part or all of amount, on behalf of developer, when presented by authorized individual
• state that letter of credit can be called on at any time without proof provided to financial institution that conditions for forfeiture exist
• state that the letter of credit may be reduced from time to time by written notice from Minister or authorized individual to financial institution

We have provided a Sample Letter of Credit here.