Imagine being slapped with a 6 figure bill 2 days before closing on your preconstruction townhome? This actually happened in Clarkson, Mississauga just last week.
This report came out that a handful of buyers were stuck with a $70k-170k bill 48 hours before closing or they face losing out on their purchase. The builder said these are all development charges from the city that cover municipal development charges, parkland levies, connection of utilities and services and other additional infrastructure costs for the city which include new libraries, roads, rec centres, and schools.
Toronto city council just approved huge increases to development charges to new construction to help fund the growth in population with services and infrastructure needed for a growing and thriving city. Development charges are set to go up by nearly 50% over the next 2 years.
By 2024 developers for one bedroom units will be paying an additional $18k ($35k to $52k) and for 2 or more bedrooms, ($55k to $80k) an additional $25k. For detached and semi-detached homes; builders will face an increase of $43k ($93k to $137k).
Why the increase? Well, City officials are expecting a huge growth in population in Toronto over the next 30 years. They forecast a growth of more than 430k people and 185k new employees by 2041. The city will need to improve the development in infrastructure in the coming years so the question isn’t about whether the city needs revenue to support this growth, it’s whether this is the right way to go about it.
With this increase in developmental charges, do you think the builder will eat the cost? You think they’re doing this for the people? No, They will pass on these charges to buyers and ultimately, this will affect mostly younger Canadians, first time buyers and immigrants looking to get into the market.
This will affect builders in terms of their ability to bring projects to the market. With the rising cost of materials, shortage of labour and now additional development charges, we can see an increasing number of projects being cancelled, further adding to the housing crisis.
Back to these buyers that were stuck with the massive bill at closing. In a development with 74 units, how come only a handful of buyers were faced with this bill? I don’t know what happened in their specific situation, but I would guess that they didn’t do the 4 things that’s needed to protect yourself when buying preconstruction.
- Work with a realtor who is familiar with preconstruction sales
- Ensure that levies and development charges are capped before signing
- Have a lawyer review your agreement during the 10-day cooling off period
- Prepare for your PDI (pre-delivery inspection) to ensure the property is completed to your satisfaction before taking possession.
Got questions about buying preconstruction? You can book a free call with me in the calendly link below at a time that works for you.
- Schedule a Zoom call: calendly.com/mister_sauga
- 📲 647-504-0690
- 📧 steven@mistersauga.ca