Ten things to check
before you sign.
Buying a condominium that does not exist yet is a different transaction from buying one that does. The price is the least of it. What matters is the deposit schedule, what you pay to live there before you own it, whether the occupancy date binds the builder to anything, and what happens if the project is cancelled. Here is the whole list, with the source for each one.
We have separated what the rules say from what we think. The items marked Rule restate a regulator's published position and link to the page we read it on. The ones marked Our vieware what we would tell you across a table, and you should weigh them as opinion. None of it is legal advice, and on a purchase this size you want your own lawyer.
You have ten days to change your mind
Buying a condominium before it is built is not like buying a resale home. Ontario gives you a rescission period of ten calendar days, and during it you can cancel with no penalty and get your deposit back in full.
The clock does not start when you sign. It starts once you hold all three of the agreement of purchase and sale, the disclosure statement, and the condominium buyers guide. If the developer makes a material change to the disclosure statement later, the period starts again.
Use the ten days. That is the window in which your own lawyer reads the agreement, and it is the only point in the whole process where walking away costs you nothing.
Ten calendar days is the Home Construction Regulatory Authority’s own wording, on the page linked below. The HCRA is the body that licenses new home vendors in Ontario.
Source: Home Construction Regulatory Authority, Before You Buy
Your deposit is protected up to twenty thousand dollars
Tarion protects deposits on a new condominium unit up to twenty thousand dollars. A typical deposit on a Toronto preconstruction condominium is fifteen or twenty percent of the purchase price, which on a seven hundred thousand dollar suite is well past that ceiling.
The gap above twenty thousand dollars is covered only by the way your agreement holds the money in trust and by any excess deposit insurance the developer arranges. Ask which one applies to you, and ask to see it in writing.
You will pay to live there before you own it
There is a stretch between the day you move in and the day the building is registered and the unit is legally yours. It is called interim occupancy, and it can run from a few weeks to more than a year.
During it you pay an occupancy fee made up of three parts: interest on the unpaid balance of the purchase price, the estimated monthly municipal taxes for your unit, and the projected common expense fee. None of it comes off the purchase price. It is not a mortgage payment and it builds you no equity.
Work out what that figure will be before you sign, not after. On a small suite it is often close to what the unit would rent for, and on a large one it can be more.
Source: Tarion, interim occupancy
Ask whether the occupancy date is tentative or firm
These are two different things and the difference is worth money. A tentative occupancy date can be moved more than once, with ninety days written notice each time, and no compensation is owed to you.
A firm occupancy date is different. If the builder misses it you are owed one hundred and fifty dollars a day up to a maximum of seven thousand five hundred dollars, plus a further one thousand five hundred dollars if they failed to give you ten days notice of the delay.
There is also an outside occupancy date, the last date the agreement permits. If the unit is not ready by then you have thirty days in which you can terminate and have your deposit returned with interest.
Almost every listing you will read anywhere prints a bare year and says nothing about which kind of date it is. We print the kind, when the developer has published it.
It may never be built, and the agreement says so
Ontario requires a licensed vendor to attach a condominium information sheet as the first page of the agreement of purchase and sale. In the regulator’s own words, a preconstruction condominium comes with the risk that it may never be completed.
That sheet also has to set out the early termination conditions, which are the specific circumstances in which the developer is allowed to cancel: sales targets not met by a certain date, zoning or development approvals not obtained, financing not arranged. Read them. They are the list of ways this can end without you.
If the project is terminated, your deposit must be returned to you with interest at the rate the Condominium Act sets.
Whether you get the HST rebate depends on who moves in
The price on a preconstruction price list almost always assumes you will live in the unit, and that you will assign your new housing rebate to the builder so the rebate is already inside the number you are quoted.
If you buy it to rent out, that assumption fails. You pay the HST on closing and then claim it back yourself through the new residential rental property rebate, which is a separate application with its own rules and its own timing.
The federal new housing rebate is available in full up to a purchase price of one million dollars and phases down to nothing at one and a half million. The Ontario new housing rebate is capped at twenty four thousand dollars.
This is one to put to an accountant before you sign, not after you close.
Look the builder up before you look at the suite
Anyone who builds or sells a new home in Ontario has to be licensed by the Home Construction Regulatory Authority, and the Ontario Builder Directory is public. It shows how many homes a builder has completed, how long they have been operating, and any charges or convictions against them.
It takes about a minute and it is the single most useful minute in the whole exercise. Every brochure says the builder has decades of experience. The directory says what they actually built.
Source: Ontario Builder Directory
What we would tell you
These are judgements rather than rules. They are what we have seen work and not work, and a different agent might weigh them differently.
Get the development charges capped in writing
Development charges and levies are passed on to you on closing day, and if the agreement does not cap them they are whatever the municipality has raised them to by the time the building registers, which may be three or four years after you signed.
In our experience this is the most common source of a closing day surprise on a preconstruction purchase. A capped levy clause is negotiable and it is often given without much argument, particularly early in a launch, but it is only given if it is asked for.
Ask for the cap in dollars, separately for a one bedroom and a two bedroom, and get it into the agreement rather than into an email.
Ask about assignment even if you never intend to use it
An assignment is selling your contract to somebody else before the building registers. Whether you may do it, what it costs, and when the developer will allow it are all set by the agreement, and they vary widely.
It matters even to a buyer who fully intends to move in, because circumstances change over the three or four years between signing and closing, and a contract with no assignment right leaves you with no exit other than losing the deposit.
The things to ask for are whether assignment is permitted at all, what the fee is, whether you are allowed to list it publicly, and how much of the building has to be sold before the developer will consider one.
Use your own lawyer, and use them in the first ten days
The agreement is written by the developer, for the developer, and it is long. The rescission period exists so that a lawyer can read it while you can still walk away.
We are happy to walk you through what we know about a project, and everything we publish here is checked against a source we can show you. What we are not is your lawyer, and on a purchase this size you want one.
Where the ten days comes from. The Home Construction Regulatory Authority, which licenses new home vendors in Ontario, writes on itsBefore You Buy page that you have ten calendar days to cancel, with no penalty and a full refund of your deposit. That is the page we took it from and the wording we use. Your own agreement governs your own purchase, so have your lawyer read it inside those ten days.
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This page is general information about how preconstruction purchases work in Ontario. It is not legal, tax or financial advice, and it is not a substitute for the agreement of purchase and sale, the disclosure statement or the condominium buyers guide. Rules and figures change. Advertised by RE/MAX Realtron Realty Inc., Brokerage. E. and O.E.