Buyer Education · Ontario
Preconstruction,
explained plainly.
Everything a buyer needs to know before signing an Agreement of Purchase & Sale in Ontario — deposits, levies, occupancy fees, HST, and more.
How does preconstruction actually work?
When you buy preconstruction you are purchasing a unit that hasn't been built yet. You sign an Agreement of Purchase & Sale (APS) with the builder today, pay deposits in stages over the construction period (typically 2–5 years), and receive the keys when the building receives occupancy approval from the municipality.
There are two closing events unique to condominiums: interim occupancy (you move in but legal title hasn't transferred) and final closing (the condominium corporation is registered and you receive title). Freehold preconstruction properties only have one closing.
How do deposits work?
Ontario preconstruction deposits are paid in stages and held in trust by the builder's lawyer until final closing. They are not released to the builder during construction — this protects you.
Typical condo deposit structure
| Tranche | Amount | When due |
|---|---|---|
| At signing | 5% of purchase price | Day 0 |
| 2nd instalment | 5% | 30–90 days after signing |
| 3rd instalment | 5% | 180–365 days after signing |
| Final instalment | 5% (sometimes 2.5–10%) | Occupancy or closing |
Total deposits for condos typically range from 15–20% of the purchase price. Some luxury or high-demand buildings require 20–25%.
Typical freehold / townhome deposit structure
Freehold deposits are usually paid as a series of post-dated cheques submitted all at once at signing. You don't write them each month — you hand them over upfront and they clear on schedule.
| Builder example | Structure | Total target |
|---|---|---|
| Grand Ridge North (Oshawa) | $5K at signing + $20K at 30/60/90/120/180 days + balance at 360 days | 12.5% of purchase price |
| Summer Valley (Caivan, Ottawa) | $20K at signing + $20K × 7 monthly instalments | ~$160K (~23% on $700K) |
| Electric Grand / LIV (Brantford) | Initial deposit + 15 × $5K monthly instalments | ~$85K–$100K |
| Mattamy / MVP II | First tranche by credit card (max $50K); remainder by certified cheque | 10–15% of purchase price |
Do deposits earn interest?
No. Builders hold deposits in trust but are not required to pay you interest on them. The trust protection is there — the return is not.
What if I can't make a deposit tranche?
Missing a tranche puts you in default. The builder can void the agreement and keep your deposits. All post-dated cheques are collected at signing — make sure every one of them will clear before you hand them over.
Can I pay by credit card?
Some builders (e.g. Mattamy) allow the first tranche by credit card up to $50,000. Most require certified cheque or bank draft after the initial deposit. Confirm with the builder's sales team before signing.
What is the cooling-off period?
Under Ontario's Condominium Act, 1998, buyers of new condominium units have a 10-calendar-day cooling-off period after receiving the disclosure statement (or the APS, whichever is later). During this window you may rescind the agreement for any reason and receive a full deposit refund.
Does the cooling-off period apply to freehold townhomes or detached homes?
No. Ontario law does not provide a statutory cooling-off period for freehold preconstruction properties. Once you sign, you are bound. This is why legal review of the APS before signing is critical for freehold purchases.
What should I do during the 10 days?
Hire a real estate lawyer immediately. They will review the full APS, all schedules, the disclosure statement, and the budget. Common red flags: uncapped levies, no-assignment clauses, broad substitution rights for the builder.
Can the builder refuse to refund my deposit if I rescind?
No — within the 10-day window the right to rescind is absolute. The builder must return all deposits in full without penalty.
What are development charges and levies?
Development charges (DCs) are fees that municipalities levy on new construction to fund infrastructure — roads, transit, schools, parks, and utilities. Builders pass them through to buyers, and they can be substantial.
Real caps from actual Ontario APS agreements
| Builder / Project | DC increase cap | Parks levy cap | Other |
|---|---|---|---|
| Electric Grand / LIV Communities (Brantford) | $17,500 + HST | $3,800 + HST | Canada Post $200 + HST |
| Field Seaton / MVP II / Mattamy | $5,000 | Included in $5K cap | — |
| Grand Ridge North (Oshawa) | Uncapped — full pass-through | Pass-through | Buyer reimburses all new/increased levies |
| Caivan / Summer Valley | Current DCs in price; increases capped | In price | Most competitive structure |
Other charges that appear at freehold closing (real figures)
| Item | Typical amount |
|---|---|
| Water meter | $583–$586 |
| Hydro meter | $339 |
| Boulevard tree / landscaping | $400 |
| Canada Post community mailbox | $200 |
| Damage/security deposit (refundable) | $1,000 |
| Realty tax deposit | $500 |
| Air conditioning (if required) | $3,500 |
| Rear deck (if grade requires) | $7,500 |
| Walkout basement (if grade requires) | $25,000 |
| Lookout basement (if grade requires) | $15,000 |
| Law Society transaction levy | $65 |
| Electronic land registration | $272–$373 |
| HCRA regulatory fee | Varies (billed as adjustment) |
| Tarion enrolment fee | Scales with price — approx $600–$2,000 |
Watch out for grading surprises
The builder has the right to change grading during construction. If your lot ends up requiring a walkout or lookout basement configuration, you can be billed $15,000–$25,000 at closing — with no right to refuse. Your lawyer should flag whether the APS limits grading-related substitutions.
How do I find out if my charges are capped?
Look in Schedule C or Schedule C-A (the closing adjustment schedule). Ask your lawyer to extract every adjustment item and build a worst-case closing cost scenario before you sign.
What are occupancy fees?
This applies to condominiums only. Between the date you receive the keys (interim occupancy) and the date the condo corporation is registered (final closing), you do not legally own the unit yet — but you are living in it. During this period you pay the builder an occupancy fee.
How the occupancy fee is calculated
| Component | Typical basis |
|---|---|
| Interest on the unpaid purchase price | Calculated at the rate prescribed by Tarion (currently based on BOC rate + spread) |
| Estimated monthly common expenses | Builder's projected maintenance fee for your unit |
| Estimated realty taxes | Builder's estimate for your unit |
Occupancy fees are not applied to your purchase price — they are essentially rent you pay to the builder while waiting for title. They are not tax-deductible for owner-occupants.
How long does interim occupancy last?
Typically 3–12 months after you receive keys, but can extend longer on large or phased projects. If the vendor cannot register the condo declaration within 12 months of your occupancy date, you gain a 30-day window to give 60 days' notice to terminate and receive all deposits back.
Can I rent out my unit during interim occupancy?
Generally no — most APS agreements restrict you to personal use during interim occupancy, and you need the builder's written consent to sublet. Violating this can void your Tarion warranty coverage.
Do I need to carry insurance during interim occupancy?
Yes — every APS reviewed requires the buyer to insure the unit for full replacement value from the date keys are received, even though you don't hold title yet.
How does HST work on new construction?
New homes in Ontario are subject to 13% HST. However, the HST rebate program means most buyers don't feel the full impact — if the builder has structured the price correctly.
The two HST scenarios
| Scenario | Who gets the rebate | Your effective cost |
|---|---|---|
| HST included, rebate assigned to builder | Builder keeps the rebate and it is built into the advertised price | You pay the listed price — no surprise at closing |
| HST excluded from purchase price | You receive the new housing rebate — up to $24,000 federal + $24,000 provincial | You pay HST at closing and claim the rebate on your tax return (or assign it to the builder) |
What is the HST rebate amount?
Federal rebate: 36% of the 5% GST on the first $350,000 (max $6,300), phasing to zero above $450,000. Ontario rebate: 75% of the 8% provincial portion, up to $24,000 — no phase-out for Ontario new homes regardless of price. Combined maximum: approximately $30,000 on homes under $350,000; primarily the Ontario $24,000 on homes above $450,000.
What if I'm buying as an investor?
You may qualify for the New Residential Rental Property (NRRP) rebate if you commit to renting the unit and it becomes the tenant's primary residence. The builder will still assign the rebate to themselves under most APS agreements — you'd apply to CRA afterward. Get an accountant familiar with preconstruction HST before signing anything.
What if I assign my contract before closing?
The assignee (new buyer) must still pay the rebate equivalent to the vendor at closing as if they were the original buyer. The assignee can apply to CRA post-closing if they're eligible. This is a common surprise in assignment transactions — confirm with a tax lawyer before assigning.
What are the total closing costs on a new build?
Beyond your final deposit, expect the following at closing. Budget generously — these vary by municipality and purchase price.
| Cost item | Typical range | Notes |
|---|---|---|
| Land Transfer Tax (Ontario) | ~1.5–2% of purchase price | First-time buyers receive a rebate up to $4,000 |
| Land Transfer Tax (Toronto municipal) | ~1.5–2% (additional) | Only if the property is in the City of Toronto |
| Legal fees (real estate lawyer) | $2,000–$4,000 | Includes title searches, registration, disbursements |
| Title insurance | $200–$400 | Strongly recommended |
| Development charges (if uncapped) | $20,000–$100,000+ | Verify cap in APS |
| Tarion enrolment fee | $600–$2,000+ | Mandatory warranty; scales with purchase price |
| Utility connection / hook-up fees | $0–$5,000 | More common on freehold |
| HST (if not included in price) | 13% on purchase price | Minus applicable rebate |
| Section 37 / community benefits | Varies | Set by municipality; disclosed in APS |
| Mortgage fees (if applicable) | $0–$2,500 | Appraisal, broker fee, lender fee |
As a rule of thumb, budget an additional 3–5% of the purchase price for closing costs on top of your deposits.
Can I sell my unit before it's built? (Assignment sales)
An assignment is the transfer of your rights and obligations under the APS to a new buyer (the "assignee") before you receive title. If the building has appreciated in value, you may be able to sell your contract at a profit.
Does every APS allow assignment?
No — and most freehold agreements flatly prohibit it. From real APS language: "The purchaser shall NOT sell, list, advertise, assign, or deal with the property in any way prior to closing without the vendor's prior written consent, which may be arbitrarily and unreasonably withheld." Any MLS listing without consent = immediate breach and the builder can terminate and keep your deposits.
When assignment is permitted — what does it cost?
| Builder | Threshold to allow | Admin fee | Legal fee |
|---|---|---|---|
| Apex Condominiums (Hamilton) | 90% of units sold | $25,000 + HST | $500 + HST |
| Grand Ridge North / MVP II | 90% of units sold | $0 | $1,000 + HST |
| Remington (Juniper Gate) | 90% of subdivision sold | Varies | Required |
Even after assignment, the original buyer (assignor) typically remains liable to the builder if the assignee defaults.
What are the tax consequences of an assignment?
CRA treats most assignment profits as business income — 100% taxable, not a capital gain. HST on the profit may also apply. CRA has aggressively audited preconstruction assignments since 2022. Speak to an accountant before assigning.
How does the assignment process work?
- Confirm your APS permits assignment and note all conditions (Schedule Z if present).
- Wait for the builder's 90% sales threshold to be met (if required).
- Find a buyer — assignments are typically marketed privately, not on MLS, without builder consent.
- Draft an assignment agreement with your lawyer.
- Obtain builder written consent; pay admin fee at that time.
- Assignor receives profit at the assignee's closing when title transfers.
What does Tarion warranty cover?
Tarion administers Ontario's new home warranty program. All new homes built by Ontario-licensed builders are automatically enrolled. It is mandatory — not optional — and the enrolment fee is paid by the buyer at closing.
| Warranty period | What's covered |
|---|---|
| 1-year | Defects in work and materials; Ontario Building Code violations; unauthorized substitutions |
| 2-year | Water penetration through basement/foundation/roof; defects in HVAC, plumbing, electrical; building envelope; Ontario Building Code violations |
| 7-year | Major structural defects |
What is a PDI (Pre-Delivery Inspection)?
Before you take occupancy the builder invites you to a walk-through to document any defects or incomplete items. Bring your own checklist and document everything in writing — items noted at the PDI are formally tracked through Tarion. Do not rush this appointment.
What is not covered by Tarion?
Normal wear and tear, cosmetic defects noted and accepted at PDI, damage caused by the homeowner, and issues with common elements beyond the first two years. Tarion also does not cover disputes about purchase price, upgrades, or deposits above the statutory threshold.
What happens if the builder delays?
Preconstruction timelines almost always extend. Builders are permitted to delay occupancy under Tarion's Critical Dates framework — but only within defined limits.
Tarion's Critical Date framework (freehold)
| Date | What it means | Notice required |
|---|---|---|
| 1st Tentative Closing Date | Initial projected closing, stated in APS at signing | — |
| 2nd Tentative Closing Date | Builder may push up to 120 days after 1st Tentative | 90 days before 1st Tentative |
| Firm Closing Date | Binding date — delayed closing compensation starts if missed | Set at least 90 days before 2nd Tentative |
| Delayed Closing Date | Builder extends again; $150/day compensation begins | 10 days minimum notice |
| Outside Closing Date | 365 days after the earlier of 2nd Tentative or Firm Date — buyer can terminate within 30 days | Buyer has 30-day window to walk |
For condos, replace "Closing" with "Occupancy" — the same framework applies to occupancy dates instead of closing dates.
How much compensation can I get for a delay?
Tarion pays $150/day for living expenses (no receipts required) plus documented expenses (moving, storage) with receipts — capped at $7,500 total. Claims must be filed within 1 year of closing. This rarely covers real carrying costs. Never plan a sale, lease, or relocation around a builder's projected timeline.
What is an "unavoidable delay"?
Builders can extend all Critical Dates — without compensation — for labour disputes, fire, acts of God, government orders, or pandemics. They must notify you within 20 days of the delay starting or by the next Critical Date. COVID-era agreements heavily used this clause; it remains in all current APS agreements.
Can the builder change the floor plan or finishes after I sign?
Yes — extensively. From actual APS language: plans, dimensions, specifications, lot numbers, municipal addresses, exterior colours, grading, door placements, and even mirror-image construction can all change without notice or price adjustment. Materials and appliances may be substituted for "equal quality" alternatives. Your lawyer should flag any unreasonable substitution language before you sign.
What if the project is cancelled?
Most agreements include early termination conditions in favour of the builder only (sales threshold, zoning, financing — typically must be satisfied by a date in the Tarion Addendum). If the builder terminates, all deposits plus interest must be returned within 10 days. Tarion backs those deposits to the coverage limits.
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