When you are looking to buy a high rise condo as a pre-construction project or by way of an assignment sale which is prevalent these days, we hear a term call Development Charges.
This article is for bringing clarity and remove confusion around development charges; these are the fees collected by the local municipality from the developers at the time when they apply for a building permit, and it is issued.
These charges are meant to be utilized to ensure that there are enough civic amenities like parks, street lights, roads, transit infrastructure, sewer pipes setup, community centers, emergency and police services, etc. The purpose of development charges laid by a city is to ensure the growth costs are recovered from the new builds and not the existing tax payers.
It’s important to understand that Development Charges are not meant for operating cost or maintenance for existing infrastructure; the cities collect property taxes for that purpose.
A municipality in three scenarios collects the development charges:
• Constructing a new building
• Making an addition to the existing building
• Modifying a structure resulting in its change of use
Here is a table that will enlighten you on the development charges currently prevalent in the City of Toronto for various property types.
Now for saving us a buyer, we need to understand where is something called Development Charge Cap; when we enter into a new construction condo purchase agreement with a builder, we must ensure it is Development Charges capped to a certain amount.
When the city fees for development charges increase during the time the construction happens, the builder transfers this amount and charges to the purchaser. However, if in your initial contract you had a capped ceiling on Development Charges, your builder can charge you only up to a maximum of that amount. The cap will avoid any surprises at the time of closing and need to arrange extra cash.
The development charges are built into the price what builder charges us at the time of launch; however, if the city increases their fees & levies during the construction period, they transfer this amount and charge the unit holder at the time of closing. The capping of development charges in the purchase agreements will give you peace of mind.
I wish you all the best and call or text if you have any questions.
Team Ravi and Mudit