Buying
Development Charges and Closing Costs on Pre-Construction
5 min readPublished
Quick answer
On top of the price, an Ontario pre-construction home can carry closing adjustments: increases in development charges and education levies, utility and meter connection fees, the Tarion enrolment fee, and land transfer tax. What the builder can charge depends on your agreement and its Tarion addendum. A negotiated cap on these adjustments is the main protection, so read the list before you sign.
Key facts: development charges and closing costs on pre-construction homes
| Development charges | Municipal fees on new development, set under the Development Charges Act, 1997 |
|---|---|
| Who pays the municipality | The builder; the agreement decides how much can be passed on to you |
| Your protection | The adjustments listed in the agreement and Tarion addendum, and any dollar cap you negotiate |
| Condo interim occupancy fee | Interest on the unpaid balance, estimated property tax and estimated common expenses |
| Land transfer tax | Paid by the buyer on closing; Ontario has specific rules for valuing new homes |
| Development charge timing | Bill 17 (2025) lets residential development charges be deferred to occupancy |
What development charges and levies are
Development charges are fees that Ontario municipalities charge on new development to help pay for the roads, water, sewers, transit and other services that growth needs. They are set by each municipality under the Development Charges Act, 1997, and some regions and school boards add their own charges, such as education development charges.
The builder pays these charges to the municipality. The question for a buyer is how much of them the builder can pass on to you. Usually the price you sign for includes the charges in force when the project was priced, and the agreement says whether later increases, or certain other charges, are added to your closing costs.
Closing adjustments you may see
Closing adjustments are amounts added to (or credited against) the price on your statement of adjustments. Depending on the agreement, they can include:
- Increases in development charges or education development charges since the agreement was signed
- Utility, water meter, hydro and gas connection or installation fees
- The Tarion warranty enrolment fee
- Fees for registering the condominium or the transfer, and a levy the Law Society charges on closings
- Parkland, tree-planting, fencing, driveway paving or similar charges on some freehold homes
- HST on some of the adjustments
- A share of prepaid items such as property tax or common expenses
How caps and the Tarion addendum protect you
Every Ontario new home agreement must include the Tarion addendum. It sets out rules on closing dates and delays, and it requires the adjustments a builder can charge to be set out in the agreement. If the agreement and the addendum conflict, the addendum wins. A builder cannot add a new category of charge at closing that the agreement does not allow.
The strongest protection is a cap: a fixed dollar ceiling on development charge increases, or on all closing adjustments together. Some builders offer caps at launch; others agree to them only if asked. Ask for the cap in writing in the agreement, and ask your lawyer whether it covers every adjustment or only some of them.
- Ask: is there a cap on development charge increases, and in what dollar amount?
- Ask: is there an overall cap on closing adjustments?
- Ask: which adjustments carry HST on top?
- Ask: are utility connection fees charged at cost or as fixed amounts?
Development charge changes in 2025
Ontario's Bill 17, the Protect Ontario by Building Faster and Smarter Act, 2025, became law in June 2025. Among other changes, it lets residential development charges be deferred until occupancy rather than paid when the building permit is issued, without interest. That changes when the builder pays the municipality. It does not change what your agreement says you owe, so the clauses above still decide your closing costs.
Municipalities also change their development charge rates from time to time. Your lawyer can check the current rates on your municipality's website.
Interim occupancy fees on new condos
Most new condo buyers move in before the building is registered. During this interim occupancy period you do not own the unit yet, and you pay the builder a monthly occupancy fee instead of mortgage payments. Under the Condominium Act, that fee is limited to interest on the unpaid balance of your price, the estimated monthly property tax, and your estimated share of common expenses. None of it pays down the price.
Interim occupancy can last months. Budget for it alongside your current housing costs, because the length depends on when the condominium is registered.
Reading your statement of adjustments
A few weeks before closing, the builder's lawyer sends a statement of adjustments: the price, less deposits and any credits (such as the HST rebate, if assigned to the builder), plus the closing adjustments. It shows the balance you must pay. Go through it line by line with your lawyer.
- Match every charge to a clause in your agreement or the Tarion addendum
- Check that any cap you negotiated has been applied
- Confirm the HST rebate credit, and the interest credit on condo deposits
- Ask for the calculation behind development charge increases and utility fees
- Query anything that looks like a new category of charge the agreement does not allow
Land transfer tax and the final closing
The buyer pays Ontario land transfer tax on closing, and Toronto buyers also pay the municipal land transfer tax. On a new home, Ontario has specific rules for working out the value the tax is charged on, including how HST and upgrades are treated. On an assignment, the tax is based on the total the assignee pays, including what they pay the original buyer. Your lawyer calculates it and collects it on closing.
Put the whole picture in one budget: the balance of the price, the closing adjustments, land transfer tax, legal fees, mortgage costs, and moving. Then check it against your mortgage approval.
This guide is general information, not legal or tax advice. Rules change and every agreement is different, so have a real estate lawyer review your agreement and speak to an accountant about tax before you sign.
Key takeaways: development charges and closing costs on pre-construction homes
- Development charges are municipal fees on new development; the builder pays them, and the agreement decides how much you reimburse.
- Closing adjustments must be set out in the agreement; the Tarion addendum prevails if there is a conflict.
- Negotiate a written dollar cap on development charge increases or on all adjustments.
- Condo interim occupancy fees cover interest, estimated tax and common expenses; none reduces the price.
- Budget for land transfer tax and all closing costs together, then check it against your mortgage approval.
Email me this guide
The quick answer and the key takeaways in your inbox, with a link back here.
Development charges and closing costs on pre-construction homes: frequently asked questions
Do buyers pay development charges on pre-construction in Ontario?
The builder pays development charges to the municipality. Your agreement decides whether any increases, or other levies, are passed on to you as closing adjustments. Ask for a written cap before you sign.
What is a development charge cap?
A clause that limits how much the builder can charge you for development charge increases, or for closing adjustments in total, usually as a fixed dollar amount. It only protects you if it is in the signed agreement.
What are interim occupancy fees?
The monthly amount a new condo buyer pays the builder between moving in and the condominium being registered. The Condominium Act limits it to interest on the unpaid balance, estimated property tax and estimated common expenses.
Can a builder add closing charges that are not in my agreement?
The adjustments a builder can charge must be set out in the agreement, and the Tarion addendum prevails over the agreement if the two conflict. If your statement of adjustments includes a charge you cannot match to a clause, ask your lawyer to challenge it before closing.
Is land transfer tax charged on pre-construction homes?
Yes. The buyer pays Ontario land transfer tax on closing, plus Toronto's municipal tax in Toronto. Ontario has specific rules for valuing new homes, and your lawyer calculates the amount.
Sources
- Development Charges Act, 1997, S.O. 1997, c. 27 — Ontario e-Laws
- Bill 17, Protect Ontario by Building Faster and Smarter Act, 2025 — Legislative Assembly of Ontario
- Interim occupancy — Condominium Authority of Ontario
- Condominium Act, 1998, S.O. 1998, c. 19 — Ontario e-Laws
- Land transfer tax: determining the value of consideration for new homes — Government of Ontario
- Condo units: coverage for occupancy dates, delays and cancellations — Tarion
Published by Summitly, the website of Coldwell Banker Summit Realty, Brokerage, registered with the Real Estate Council of Ontario (RECO); an independently owned and operated Coldwell Banker franchise. Broker of Record: Waqar Afzal. Questions or corrections: our contact form. How we write and check these pages: editorial policy.
Cite this guide
Summitly Editorial. (2026, September 28). Development Charges and Closing Costs on Pre-Construction. Summitly (Coldwell Banker Summit Realty, Brokerage). https://www.summitly.ca/guides/pre-construction-closing-costs-ontario
Guide URLs never change. Section links are stable too.
Run the numbers
