Development Charges Upfront: Ontario Proposes Disclosure Rules for Homebuilders
Development charges (“DCs”) can represent a significant component of the cost of a new home, but the full amount is not always separately disclosed when an agreement of purchase and sale is signed. Depending on how a builder structures the transaction, DCs may be incorporated into the sale price, payable as an adjustment on closing or addressed through a combination of the two.
Ontario is proposing to make that disclosure mandatory. If implemented, the new requirements would affect how builders prepare new home purchase agreements and communicate DC amounts and subsequent adjustments to purchasers.
Builders Would Have to Disclose Development Charges Upfront
Under the Ministry of Public and Business Service Delivery and Procurement’s proposal, builders would be required to disclose the full amount of DCs imposed under the Development Charges Act, 1997 when the purchase agreement is signed, regardless of whether those charges are incorporated into the purchase price or payable on closing.
Where the final amount is not yet known, the builder would disclose the present-day amount calculated under the municipality's current DC bylaw. The disclosure would identify the amount as an estimate that may increase or decrease and use standard language provided by the Ministry. Builders would also be required to advise purchasers of adjustments to the disclosed amount within a reasonable period once updated information becomes available.
The proposal would not prevent builders from incorporating DCs into the purchase price or making them payable on closing. Instead, it would introduce an upfront disclosure requirement regardless of how those charges are ultimately recovered.
Missing or Inaccurate Disclosures Could Carry Consequences
The Ministry proposes to support the requirements with administrative monetary penalties under the New Home Construction Licensing Act, 2017, enforced by the Home Construction Regulatory Authority.
Potential non-compliance would include failing to disclose applicable DCs, providing an inaccurate present-day or final amount, or failing to advise a purchaser of an adjustment within a reasonable period. The amount of any potential penalties has not yet been determined.
The Ministry is also considering whether purchasers should have remedies where required DC information is missing or inaccurate, including a limited right to rescind an agreement or receive a refund of undisclosed amounts. These potential remedies remain consultation questions and have not been adopted.
The Bottom Line
The proposed requirements are not yet law, but they could change how DCs are addressed throughout the new home sales process. For builders and developers, the proposal would mean greater upfront disclosure, ongoing obligations when amounts change and potential consequences where required information is missing or inaccurate.
HOW WE CAN HELP
RAR Litigation advises developers, builders and other real estate industry participants on disputes arising from new home transactions, including agreements of purchase and sale and closing adjustments.
Contact our team to discuss how proposed changes to development charge disclosure may affect your rights and obligations.