Development charges and closing levies개발 부담금, 클로징 레비

What is it?

Development charges (DCs) are fees a municipality charges on new construction. New homes mean more demand for roads, transit, water and sewers, parks, libraries and fire stations, and the city collects part of that cost from developers. The Development Charges Act, 1997 gives Ontario municipalities this power.

By law the builder pays these fees to the city. But pre-construction contracts usually contain a clause that makes the buyer repay the builder for them, plus other items, at final closing. For the buyer, they become extra costs on top of the price, often called "closing levies" or "closing adjustments".

A resale home has none of these costs. They exist only on new homes, which is why first-time pre-construction buyers often miss them.

Items you will usually see in the contract

Every builder is different, but the "adjustments" section of a pre-construction agreement usually lists items like these. Check your own agreement for the actual items and amounts.

• Development charges (DCs): the city’s fee. Toronto’s rate depends on the type of home (single or semi, apartment with two or more bedrooms, and so on). See the table below.
• Education development charges: a fee school boards charge under the Education Act to buy land for new schools. In Toronto, the City collects it on behalf of the Toronto Catholic District School Board.
• Parkland dedication or cash-in-lieu: under section 42 of the Planning Act the city can take part of the land for parks, or take money instead. The basic limit is 5% of the land for residential projects, but under the alternative rate it can be up to 10% or 15% of the land or its value, depending on the size of the site.
• Community benefits charge: a charge the city imposes on development under section 37 of the Planning Act. It replaced what used to be called "Section 37" benefits.
• Hydro, water and gas meter installation and utility hook-up fees, and sewer and water connection fees.
• The Tarion enrolment fee: what the builder pays to enrol the home in the new-home warranty program. Contracts often pass it on to the buyer.
• Others such as the law society transaction levy, registration and document fees, and various "administration fees" written into the agreement.

Whether HST applies to these items, and which items are inside the cap, varies by contract. Ask your lawyer about each line.

Why does a "cap" matter?

The problem is that the amounts are not fixed when you sign. City rates change with each new by-law, and a pre-construction condo can take three to five years from contract to closing. If the agreement only says "the actual amount at closing", you pay whatever the rate has become by then.

That is why lawyers negotiate a cap with the builder before you are locked in: for example, "development charges, education charges and parkland levies together shall not exceed $X". A new condo contract comes with a 10-day cooling-off period, so use it to have a lawyer review the agreement and ask for a cap. Check three things: is there a cap, which items are inside it, and is HST added on top of it.

The Tarion Addendum (the document attached to every new-home agreement) includes summary sheets for closing costs and adjustments. Ask your lawyer whether the builder can charge anything that is not listed there.

City of Toronto development charge rates (per unit)

These are the development charges the City of Toronto imposes on non-rental residential buildings (rate schedule effective June 26, 2025). The city charges the developer; how much is passed on to you is set by your contract.

Source: City of Toronto Development Charge Rates, effective June 26, 2025. The City is running a comprehensive DC review into 2027 and has a reduction program, so check the current rates on the City’s page. Outside Toronto (Markham, Richmond Hill, Vaughan, Mississauga and so on) each city and region has its own rates.

When and who pays the city?

The basic rule in the Act is that the builder pays when the building permit is issued (section 26). Since November 3, 2025, development charges for non-rental residential projects such as condos and freehold homes must be paid in full before the occupancy permit is issued (section 26.1).

You never pay the city directly. The builder pays, and your contract makes you repay the builder on the statement of adjustments at final closing. So the adjustments clause in your agreement is everything.

Example

What to watch out for

• If an ad says "levies included", check the contract to see which ones. Development charges may be included while education and parkland levies are not.
• Even with a cap, check whether HST is added on top of the capped amount.
• If you buy by assignment, you inherit the original contract’s adjustments clause. If it has no cap, you inherit that risk too.
• Close to closing, have your lawyer get the builder’s draft statement of adjustments early and check every line against the contract. Items that are not in the contract may not be payable.
• Work out your total cash needed at final closing (rest of the down payment, closing costs and these adjustments) at least a year before occupancy.