Local governments may require an owner of land that is to be subdivided or developed
to provide roads, water, sewage and/or drainage works with enough capacity to service
properties that are situated near their development. Such works may be termed
“excess” or “extended” services. A water main that must
be constructed along vacant properties in order to reach a proposed subdivision
is an example of an extended service. A requirement that a water main be sized
larger than immediately required to service a proposed subdivision is an example of an excess
service. The up-front cost of the excess or extended service must be paid by the
local government, or the local government can require the subdivider or developer to pay the costs.
Whether it is the local government, subdivider, or developer that pays the up-front
costs, they are entitled to recover a portion of the costs from the owners of properties
beyond their development that will benefit from the works in the future (latecomers).
This is accomplished by having the local government collect a latecomer tax or
fee (latecomer charge). Where a subdivider or developer have paid the up-front costs, the
local government must collect the latecomer charge and remit monies collected to the subdivider or
developer. The latecomer charge is payable at the time a latecomer connects to the
service or the use begins. For example, where a developer financed the cost of a
water main that is considered to be an excess or extended service, the latecomer
charge would be payable when a latecomer obtains a water connection to the works
financed by the developer.
In order to initiate a latecomer scheme, the local government usually enters into an
agreement with the subdivider or developer that identifies the costs that will be
recovered by a latecomer charge, the amount of the latecomer charge and the term of
the agreement. The term of the agreement cannot exceed 15 years and no latecomer
charges are payable after the term of the agreement. Previously, under the Community Charter,
latecomer agreements could not exceed 10 years. Local governments have the flexibility to
amend existing latecomer agreements and extend them to a maximum of 15 years, if there is agreement
with the original developer.
Local governments, subdividers, or developers who finance excess or extended services
accept the risk that not all of their costs will be recovered before the end of the
latecomer agreement. This is because some or all of the owners of the properties that
will benefit from the excess or extended service may not connect or use the service
before the term of the agreement ends.