{"id":13101,"date":"2017-07-18T01:00:19","date_gmt":"2017-07-18T05:00:19","guid":{"rendered":"http:\/\/www.zoocasa.com\/blog\/?p=13101"},"modified":"2022-12-02T10:56:03","modified_gmt":"2022-12-02T15:56:03","slug":"what-are-pre-construction-condo-development-charges","status":"publish","type":"post","link":"https:\/\/www.zoocasa.com\/blog\/what-are-pre-construction-condo-development-charges\/","title":{"rendered":"What Are Pre-Construction Condo Development Charges?"},"content":{"rendered":"<p>Unwary buyers who\u2019ve signed up for a pre-construction condo over the last few years could find themselves faced with an unexpected extra bill when it eventually comes time to move in.<\/p>\n<p>While most buyers of <a href=\"http:\/\/www.zoocasa.com\/toronto-on-condos\">Toronto condos<\/a> know they need to budget for closing costs \u2013 legal fees, land transfer tax, pre-paid property taxes, etc. \u2013 many fail to account for municipal development levies which, although initially charged to the real estate developer, actually end up coming out of the buyer\u2019s pocket.<\/p>\n<p>This can change price comparisons considerably, warns realtor Jamie Harnish. While listed price points make pre-construction a viable option in areas where resale condo prices are through the roof, many <a href=\"https:\/\/www.zoocasa.com\/blog\/the-pros-and-cons-of-reconstruction\/\">inexperienced buyers underestimate<\/a> these development costs when shopping around.<\/p>\n<p>\u201cPre-construction<em> can<\/em> be cheaper, at least that initial price tag \u2013 although not as much anymore \u2013 but certainly the advertised prices are less than what resale prices are going to be,\u201d he explains. \u201cI think that once people get further into a pre-construction deal they\u2019re realizing that the numbers are starting to add up and &#8230; it\u2019s not as straightforward as buying a place for $499,000.\u201d<\/p>\n<h2>Costs Vary Widely from Project to Project<\/h2>\n<p>Development levies are collected by the municipality to pay for various services, including sidewalks, parks, sewers, and subway extensions \u2013 as well as improvements to nearby police, fire, and health services. While the amounts can vary sharply from project to project, the charges (here, for instance, are the most recent <a href=\"https:\/\/www.google.ca\/url?sa=t&amp;rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=6&amp;ved=0ahUKEwjZm7SJqtTUAhXq34MKHdu4CO4QFghIMAU&amp;url=https%3A%2F%2Fwww1.toronto.ca%2FCity%2520Of%2520Toronto%2FCorporate%2520Finance%2FDevelopmental%2520Charges%2FFiles%2Fpdf%2FD%2FDC%2520Rates%2520-%2520Feb%25201%25202017.pdf&amp;usg=AFQjCNE2aVA0sOzxETonH4MPYsOdrVl9SA&amp;cad=rja\" target=\"_blank\" rel=\"noopener noreferrer\">development rates<\/a> for the city of Toronto) represent a substantial closing cost that can easily boost pre-construction condo buyers\u2019 outlay by as much as $10,000, depending on a condo\u2019s size and location.<\/p>\n<p>When you purchase into a pre-construction project, whether a <a href=\"https:\/\/www.zoocasa.com\/toronto-on-real-estate\/condos\">Toronto<\/a>, <a href=\"https:\/\/www.zoocasa.com\/vancouver-bc-real-estate\/condos\">Vancouver<\/a>, or <a href=\"http:\/\/www.zoocasa.com\/hamilton-on-condos\">Hamilton condo<\/a>, your contract will advise you that you can expect to owe a certain amount in levies at closing. The trouble is, these charges are payable at the time the building permit is issued, not when the condo project is launched or in pre-sale. And a lot could change before the project actually gets built, driving up costs in the interim.<\/p>\n<p>For example, a group of Scarborough condo buyers were left scrambling to come up with thousands of dollars in <a href=\"http:\/\/www.cbc.ca\/news\/canada\/toronto\/scarborough-condo-closing-costs-1.3486212\" target=\"_blank\" rel=\"noopener noreferrer\">unexpected closing costs<\/a> that they maintained were not made clear when they agreed to purchase their units. While the idea of additional fees was in the sales contract, many buyers are shocked at how these costs escalated. Ultimately though, rather than risk losing their deposits and being forced to move out of the units, most swallowed the unexpected bill.<\/p>\n<h2>Negotiate a Cap to Prevent Nasty Surprises<\/h2>\n<p>Frequently, buyers of pre-construction condos don\u2019t bring in a lawyer until much later in the process \u2013 and that can be a costly mistake, suggests Toronto real estate lawyer Jeffrey Cowan. When clients brings him a contract for review, Cowan always advises them to go back to the builder during the 10-day cooling off period to get these development charges \u2018capped\u2019.<\/p>\n<p>This way, if the city decides to double the development charges between the time they buy their unit and the time the project closes, they\u2019ll be protected. Regardless of the actual amount paid by the developer, they\u2019ll only be responsible for the maximum level agreed upon, he explains. It also forces clients to factor in these additional costs and fine tune their budget in advance of receiving the final statement of adjustments from the builder.<\/p>\n<h2>Development Costs Continue to Rise<\/h2>\n<p>Development charges are a huge source of revenue for municipalities and there\u2019s no sign of them letting up anytime soon. In fact, many local municipalities are continuing to raise the prices of such charges.\u00a0But you don\u2019t want that to be your problem. Like most things in real estate, everything is negotiable. If a developer isn\u2019t on board with capping these levies to a reasonable level, it may be time to look elsewhere.<\/p>\n<p>With this in mind, prospective condo buyers should check the overall track record of the developer, particularly when it comes to their record for finishing projects on schedule and on budget. Tarion Warranty Corporation maintains a searchable <a href=\"http:\/\/www.tarion.com\/_layouts\/buildersearch\/builder_search.aspx\" target=\"_blank\" rel=\"noopener noreferrer\">database<\/a> of developers, with detailed data about builders\u2019 past projects.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Unwary buyers who\u2019ve signed up for a pre-construction condo over the last few years could find themselves faced with an unexpected extra bill when it eventually comes time to move in. While most buyers of Toronto condos know they need to budget for closing costs \u2013 legal fees, land transfer tax, pre-paid property taxes, etc. [&hellip;]<\/p>\n","protected":false},"author":55,"featured_media":13103,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jnews-multi-image_gallery":[],"jnews_single_post":{"subtitle":"","format":"standard","video":"","gallery":"","source_name":"","source_url":"","via_name":"","via_url":"","override":[{"single_blog_custom":"","sidebar":"","second_sidebar":"","share_position":"","share_float_style":"","post_date_format":"","post_date_format_custom":"","post_reading_time_wpm":"","zoom_button_out_step":"1","zoom_button_in_step":"1","number_popup_post":"1"}],"image_override":[{"single_post_thumbnail_size":"","single_post_gallery_size":""}],"trending_post_position":"","trending_post_label":"","sponsored_post_label":"","sponsored_post_name":"","sponsored_post_url":"","sponsored_post_logo":"","sponsored_post_desc":""},"jnews_primary_category":{"id":""},"footnotes":""},"categories":[76,42],"tags":[],"class_list":["post-13101","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-buying-a-home","category-condominiums"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v21.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>What Are Pre-Construction Condo Development Charges? | Zoocasa<\/title>\n<meta name=\"description\" content=\"Pre-construction condo development charges can be a nasty surprise for buyers investing in pre-built units. 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