The area weighted average value for a surface property is an inadequate representation of the dynamical response of the complex sub-grid scale character. The concepts of height scales and effective roughness length are implemented into a 3-D mesoscale model BLFMESO for the computation of grid representative surface fluxes of momentum and heat.These height scales include the blending height for momentum transfer and a height scale for heat transfer over heterogeneous terrain. This technique represents the net dynamical influence of the sub-grid scale surface properties on the boundary layer fluxes and flow. The height scales and effective roughness length are stability dependent and dynamically interact with the process of mixed layer evolution due to diurnal variation of the surface temperature. The current version of the model incorporates a non-local diffusion closure. Three dimensional simulations are carried out for the diurnal evolution of the mesoscale circulations over Lake Ontario and Lake Erie regions. The horizontal grid spacing of the model is chosen as 5 km and sub-grid scale is chosen as 1 km. In correspondence with the effective roughness lengths, the effective friction velocity and Monin-Obukhov length are applied in the computation of the effective surface fluxes and the boundary layer height. Similarly these effective parameters are utilized in the non-local diffusion scheme to compute eddy diffusivities for momentum and heat. The results show that the effective surface fluxes and stress are weighted towards the larger roughness elements. This affects the circulation and evolution of the boundary layer height.