Who pays development charges on a new home purchase in Ontario?

Development charges are fees that Ontario municipalities levy on new construction to fund growth-related infrastructure — roads, water, sewers, parks, and transit, among other things. While development charges are legally imposed on the builder, the builder typically passes them on to the buyer through the purchase agreement.

Many new home purchase agreements in Ontario include a clause allowing the builder to pass on any increase in development charges that occurs between the date of signing and the date of closing. This means the development charge on your statement of adjustments at closing may be higher than the amount disclosed when you first signed the agreement, sometimes significantly so.

Buyers of new homes should read the development charge clause in their purchase agreement carefully before signing. If development charges rise between signing and closing, you may have very limited ability to challenge the increase. Your lawyer can explain the specific clause in your agreement and advise on whether it is standard or unusually broad. Development charges vary significantly between municipalities and can add tens of thousands of dollars to the effective cost of a new home. They are separate from the purchase price and from land transfer tax.