CASUAL LEGAL: Buyer Beware? Section 651 of the MGA and Oversizing Costs

Attention: AMSC Members – Please distribute to all appropriate personnel

Buyer Beware? Section 651 of the MGA and Oversizing Costs

By Daina Young

Reynolds Mirth Richards Farmer LLP

AMSC Casual Legal Service Provider

Section 651 of the Municipal Government Act empowers a subdivision or development authority to require the applicant for subdivision or development to enter into an agreement with the municipality with respect to oversize improvements. This provision is unique in that it allows the municipality to require a developer to construct or pay for all or a portion of the cost of an improvement with capacity in excess of that required for a proposed development or subdivision, or to pay for all or a portion of the cost or an improvement that was constructed or paid for in whole or in part by the municipality prior to the date of the application for subdivision or development. This allows a municipality to place the onus of front end development costs on early developers, or alternatively provide a mechanism for the municipality to recover such costs when it has already incurred them. The legislation also provides a mechanism whereby a municipality can endeavor or undertake to assist developers that have been required to construct or pay for oversize improvement by requiring reimbursement from future developers of benefitting lands.

The obligations that may be imposed on a development under s. 651 are potentially significant. For example, if the first developer in a particular area was required to front end the cost of the water, sanitary sewer and storm water facilities for the entire area, the developer and the municipality will likely have entered into an agreement requiring the municipality to endeavor to assist the first developer in recovering those costs, by requiring future applicants for subdivision and development in the benefitting area to pay a portion of the cost of the oversized improvements for the purpose of reimbursing the first developer.

During their due diligence process, a potential purchaser of lands in a municipality may approach the municipality with various inquiries regarding the property. For example, a municipality is often requested to provide a compliance letter or certificate regarding a property’s compliance with the municipality’s land use bylaw. However, a potential purchaser may also make inquiries with the municipality about potential development costs, for example, whether off-site levies may be imposed against the property at the time of subdivision or development and whether there are any oversizing costs that may be payable under s. 651 at the time of subdivision or development.

Unfortunately, the MGA does not provide a mechanism for registering a notice that a property is a “benefitting land” against title to the property, to notify potential purchasers that the property will be subject to oversizing costs at the time of subdivision or development. If a potential purchaser inquires with the municipality regarding these matters, and the municipality provides incorrect or incomplete information, the municipality may find itself in a position where it is unable to collect the oversizing costs when a property is subdivided or developed. These inquiries can be difficult to respond to if a municipality does not have a system in place to ensure accurate and up to date records are maintained regarding properties in the municipality, including information regarding oversizing costs. Although s. 651 of the MGA significantly empowers municipalities, in order to realize its benefits a municipality must have adequate record keeping systems in place.

DISCLAIMER: This article is meant to provide information only and is not intended to provide legal advice. You should seek the advice of legal counsel to address your specific set of circumstances. Although every effort has been made to provide current and accurate information, changes to the law may cause the information in this article to be outdated.