Why might a municipality require a letter of credit or security deposit under a site plan agreement?

Municipalities commonly require a developer to post a letter of credit or other financial security as part of a site plan agreement to make sure the specific works required by the agreement, such as landscaping, grading, stormwater management features, or road and servicing connections, actually get completed as approved, rather than relying solely on the developer's promise to finish the work. If the developer doesn't complete the required works, the municipality generally has the ability to draw on that security to complete or remediate the work itself.

The amount and specific terms of the security are generally tied to the estimated cost of the outstanding works covered by the agreement and are set out in the site plan agreement itself, which is registered on title and can affect the property even after the original developer sells it. For a buyer purchasing a property still subject to an active site plan agreement with outstanding security in place, it's worth understanding what works remain to be completed, whether the security has already been drawn on or released, and whether any obligations under the agreement could pass to them as the new owner. Reviewing the agreement directly with a lawyer before closing avoids surprises.