L&M bonds guarantee that subcontractors and suppliers get paid for their work and materials on bonded projects. Owners require them to reduce lien pressure and protect the project. In Ontario they are commonly issued on the CCDC 222 form and work alongside the Construction Act's 10% holdback and prompt payment rules, giving subcontractors and suppliers a source of payment when an invoice goes unpaid.
A labour and material payment bond (also called a payment bond) guarantees that the contractor will pay their subcontractors and suppliers for work performed and materials provided on the bonded project.
If the contractor fails to pay, qualifying claimants can make a claim against the bond to recover what they're owed.
This protection is important because construction liens can complicate project ownership and financing. When subs and suppliers have bond recourse, there's less pressure to file liens.
Performance Bond
Protects the project owner if work isn't completed
L&M Bond
Protects subcontractors and suppliers if they aren't paid
L&M bonds typically cover parties who supply labour and materials directly to the bonded project.
Trades who perform work on the bonded project under contract with the principal.
Companies that supply materials incorporated into the bonded project.
Workers and labour supplied directly to the bonded project.
Note: Coverage for second-tier claimants (suppliers to subcontractors, or sub-subcontractors) varies by bond wording. Always review the specific bond terms to understand who can claim.
L&M bond amounts are typically tied to the contract value. Requirements vary by project type and owner preferences.
Most municipal and provincial contracts
Some private and high-value projects
L&M bonds are typically required alongside performance bonds. Together, they provide complete protection for the project owner, subcontractors, and suppliers.
The premium for both bonds is usually calculated together and factored into the contract price.
Learn about Performance BondsAn L&M bond guarantees that subcontractors and suppliers who provide labour and materials to the bonded project will be paid. If the contractor fails to pay, the claimants can make a claim against the bond.
Typically, first-tier subcontractors and suppliers who have a direct contract with the bonded contractor can claim. Some bonds also cover second-tier claimants (subs of subs), but this varies by bond wording.
L&M bonds reduce lien pressure on the project. When subs and suppliers have bond protection, they're less likely to file construction liens against the property, which can complicate financing and ownership.
L&M bonds are usually set at 50% of the contract value for public sector projects. Some private projects may require 100%. The amount is specified in the tender or contract documents.
Yes, they're separate bonds that serve different purposes. The performance bond protects the owner if the contractor doesn't complete the work. The L&M bond protects subs and suppliers if they don't get paid. They're often required together.
Performance bonds protect project owners from contractor default. Labour and material payment bonds protect subcontractors and suppliers from non-payment. Ontario law requires both on public contracts over $500,000. Here is a complete breakdown for contractors and project owners.
Construction bonds are mandatory on Ontario public contracts over $500,000, and increasingly common on private projects too. Here's what every contractor and project owner should know about bid bonds, performance bonds, labour & material payment bonds, and how to get bonded.
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