Canada: Land Development Considerations

Investors interested in acquiring and developing Canadian real estate should focus at an early stage on key development questions. What use can be made of the property? What regulatory permits and approvals are required? How long will the development process take? What costs are inherent in the development process?

Zoning considerations need to be addressed at an early stage. In Ontario, almost all municipalities have adopted an official plan which sets out the broad goals, objectives and policies of that municipality concerning use and development of the municipal area. Zoning by-laws passed by the municipality translate the broad policy into specific types of zones with specific uses contemplated for each zone category. The zoning by-law also sets out other standards and parameters such as for setbacks, building height, maximum site coverage and requirements for other matters such as parking. In order to obtain a building permit, whether for new construction or a redevelopment, the proposed building or redevelopment must, unless a variance is applied for and obtained, comply with the standards set out in the zoning by-law and the applicable building code. A specific site plan approval relating to the layout of the new development on the property may also be required.

Timing for a development, always a key consideration given the direct financial impact of delay, is directly affected by the number of approvals required for the proposed development. For instance, the timeline will be considerably longer if a rezoning is required and longer still if an official plan amendment is necessary as well. The parcel to be developed must be legally separated from other lands under common ownership or subdivided. Also from a timing point of view, physical services and roads will need to be available in time to mesh with issuance of a building permit for the proposed development.

Development charges and levies flow from the overriding principles applied by regulatory bodies: good planning, availability of infrastructure, such as services, facilities or schools and the funding of that infrastructure.

In Ontario, the Development Charges Act, 1997 sets out the framework under which development charges are levied. Under that Act, municipalities have the ability to pass development charge by-laws under which development charges are levied for development within that municipality. Typically, these levies are calculated on a lot area basis (usually payable at the time of subdivision or severance of the parcel) and on floor area of the construction (usually payable at the time the building permit for that construction is obtained). In general, city/town, region and school board development charges are payable by the developer and, for certain land use categories, a cash-in-lieu of parkland dedication is also payable based on land value at the time of permit issuance.

Land development legislation in Canada, particularly in Ontario, has become increasingly complex. Aside from planning law in general, development agreements with the municipality have become more sophisticated and cover more issues than they did a number of years ago. On the bright side, municipalities are increasingly open to more creative solutions to achieve proper planning objectives while recognizing the financial impact on developers and ultimate land users. For instance, front-end loading agreements encourage oversizing of services in the interests of good planning while providing a mechanism for developers to recover some of the oversizing costs down the road from other developers who benefit from the availability of increased capacity for those services. Proper negotiation and drafting of effective land development agreements such as subdivision agreements, site plan control agreements, development agreements and front ending agreements can translate into cost and time savings and other efficiencies for the developer.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.