Alert to Developers and Construction Lenders: Significant Increases to Development Charges in the City of Toronto

Are you a developer who is planning to construct a large-scale project in the City of Toronto or a construction lender providing financing to these developments? If so, you should be aware of significant, phased increases to development charges recently implemented in the City of Toronto pursuant to City of Toronto By-law No. 1347-2013. The by-law also changes how certain projects are categorized for the purposes of determining the applicable development charge.

As you may be aware, there were significant public consultations held on this issue. Although the City agreed to a reduced percentage increase in respect of the new development charges, the end result is that the new charges, once fully implemented, will essentially double what is currently charged by the City. The next increase to development charges is effective February 1, 2014, with subsequent increases to take effect on August 1, 2014, February 1, 2015, August 1, 2015 and February 1, 2016.

While certain exceptions are made pursuant to the new by-law, the majority of larger-scale developments are captured and therefore subject to the increased charges. Since the development charge is typically payable at the time of building permit issuance, there may be an advantage for developers to consider accelerating their plans to apply for a building permit in order to beat the next phased-in increase. Developers should also be mindful of accounting for these higher charges in their budgets and pro-forma financial modelling (and also double-check under which category their project falls). Construction lenders should also ensure that the correct amount of the development charge is adequately accounted for in respect of the project when assessing and/or negotiating the provision of financing for upcoming development projects in the City.

For a complete breakdown of the new phased-in development charges, please click here.

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