Development Charges in Ontario: What They Are, Who Pays and What New Home Buyers Should Check
What Is a Development Charge?
Under section 2 of the Development Charges Act, 1997, the council of a municipality may by by-law impose development charges against land to pay for the increased capital costs of services needed because of development. The Act lists the services a by-law can charge for. They include water supply and distribution, waste water, storm water, roads, electrical power, transit, waste diversion, policing, fire protection and ambulance services.
Who Pays and How a Builder Can Pass It On
The charge is imposed against the land and paid by the person required to pay it, usually the builder or developer. The Toronto Regional Real Estate Board (TRREB) says developers pay the charges first and typically pass the cost on to purchasers through the home’s price or as adjustments payable at closing. See TRREB, September 17, 2026.
For a freehold home, Tarion’s addendum limits what a builder can adjust. In the New Freehold Home Addendum (Tentative Closing Date), version dated August 24, 2026, paragraph 8 says only the items set out in Schedule B can be the subject of an adjustment to the purchase price or the balance due on closing. It says the builder shall not charge as an adjustment any reimbursement for a sum paid or payable to a third party unless the sum is ultimately paid to the third party, and that it must readjust with the purchaser if it does. Schedule B has two parts: amounts stipulated in the agreement, and other adjustments to be determined under the agreement. We read the freehold addendum only, so ask your lawyer about the form that applies to your purchase.
When Development Charges Are Paid
The City of Toronto’s page says charges for non-rental residential development are payable at occupancy and publishes its rates, by-law and background study. See City of Toronto, development charges. Other municipalities publish theirs too, so look up the by-law for the municipality where the property is.
Exemptions
- Creating the greater of one unit or 1% of the units in an existing rental building with four or more residential units (section 2(3.1)).
- A second or third residential unit in an existing detached house, semi-detached house or rowhouse, or one unit in a building ancillary to it, subject to conditions (section 2(3.2)).
- The same additional units in a new detached house, semi-detached house or rowhouse, subject to conditions (section 2(3.3)).
- Non-profit housing development (section 4.2).
Reductions in 2026: The Development Charge Reduction Program
The Government of Ontario’s Development Charge Reduction Program is part of the $8.8 billion Canada-Ontario Partnership to Build. Municipalities with an active development charge by-law as of March 30, 2026 could apply for funding for roads, water, wastewater and transit infrastructure. The page says a municipality had to reduce development charges by 30% to 50% or more for three years, and that applications are now closed (page updated June 19, 2026). See Ontario.ca, Development Charge Reduction Program.
Proposed Disclosure Rules for New Home Buyers
TRREB’s September 17, 2026 letter describes a consultation by the Ministry of Public and Business Service Delivery and Procurement on requiring builders to disclose municipal development charges in new home agreements of purchase and sale. TRREB says the Ministry is considering requiring the disclosure in the vendor section of the agreement. See TRREB. A proposal is not law. Ask your lawyer whether any new disclosure rule is in force on the day you sign.
What a New Home Buyer Should Check
Find every charge in the agreement
See whether the amount is fixed
Read Schedule B and the adjustments clause
Compare with the municipality's rate
Ask about reductions
Review it in time
For a new condominium, do this review within the 10-day right to rescind, which runs from the latest of three events. See our article on backing out of a home purchase. For a freehold home, review before you sign.
We help buyers across Ontario, including Toronto, Vaughan and Mississauga, review builder agreements. See our pre-construction condo service, our interim closing service and our Tarion warranty guide. Our fees are provided during the consultation. Call (647) 696-8069 or book a free consultation below. We serve clients in English, Hindi and Punjabi.
If You Are Building or Adding a Unit
Frequently Asked Questions
What are development charges in Ontario?
A development charge is a charge a municipality imposes by by-law on new development to pay for the increased cost of services the development needs, such as water, sewers, roads, transit, policing and fire protection. The Development Charges Act, 1997 sets the rules.
Who pays development charges?
The charge is imposed against the land and is paid by the person required to pay it, usually the builder or developer. A builder may recover the cost from buyers through the purchase price or as an adjustment at closing, so the agreement of purchase and sale is where a buyer sees it.
When are development charges paid?
For most residential development, the Act says the charge is payable in full on the earlier of the day an occupancy permit is issued and the day the building is first occupied. Rental and institutional development pay in equal annual instalments starting at occupancy. Other development generally pays when a building permit is issued, unless the by-law says otherwise.
Do I pay development charges when I buy a resale home?
A development charge is imposed on development, so it is paid when land is developed, not when an existing home is sold. An action whose only effect is to enlarge an existing residential unit does not trigger a charge. If you plan to build or add units, ask the municipality what applies.
Can a builder pass development charges on to me?
Builders typically recover them through the price or through closing adjustments, according to TRREB’s description of the Ministry’s consultation paper. What your agreement allows is what matters. For a freehold home with Tarion’s addendum, only the items in Schedule B can be adjusted, and the builder cannot charge a reimbursement of a sum paid to a third party unless it is ultimately paid.
Are development charges being reduced in 2026?
The Government of Ontario’s Development Charge Reduction Program asked municipalities to reduce charges by 30% to 50% or more for three years to receive funding. Applications are closed. Which municipalities took part and when their rates change depends on each by-law, so check your municipality’s current by-law.
Are secondary suites exempt from development charges?
The Act exempts the creation of certain additional residential units, such as a second or third unit in an existing or new detached house, semi-detached house or rowhouse, and one unit in a building ancillary to such a house, subject to conditions. Confirm your property’s facts with the municipality before you rely on the exemption.
Can I dispute a development charge?
A person required to pay a charge, or their agent, may complain to the municipality’s council that the amount was incorrectly determined, that a credit was incorrectly determined or that the by-law was misapplied. The complaint must be made within 90 days after the day the charge, or any part of it, is payable, and a decision can be appealed to the Ontario Land Tribunal.
What should I check in a new home agreement?
Find every mention of development charges, levies, fees and adjustments. Check whether the agreement states a dollar amount or an estimate, whether the amount can change after you sign and who bears an increase. Ask for the municipality’s rate for your unit type and compare it with the figure in the agreement.
Related Guides
Legal Information, Not Legal Advice. This guide summarizes the Development Charges Act, 1997 as published on e-Laws (currency date November 3, 2026), the Government of Ontario’s page on the Development Charge Reduction Program (updated June 19, 2026), the City of Toronto’s development charges page, Tarion’s New Freehold Home Addendum (Tentative Closing Date) (version dated August 24, 2026) and TRREB’s letter of September 17, 2026, checked on November 6, 2026. By-laws, rates and rules change and depend on the municipality and the date of your agreement, so confirm your own situation with a real estate lawyer before you rely on this guide.