Buying a Pre-Construction Condo in Ontario: A First-Time Buyer's Guide

A pre-construction condominium — buying a unit before the building is completed — appeals to many Ontario first-time buyers. The pitch is attractive: lock in today's price, use a staggered deposit schedule to save over several years, and move into a brand-new home. But pre-construction purchases come with risks and legal wrinkles that resale buyers never encounter. Signing a builder's standard Agreement of Purchase and Sale without legal review is one of the most expensive mistakes a first-time buyer can make.

This article explains the key features of pre-construction condo transactions in Ontario, the rights that protect you, and the clauses you need to understand before you sign.

How Pre-Construction Sales Work

Builders and their sales teams market new condo projects at sales centres, often before construction has even begun. You choose a unit (floor plan, floor level, exposure), pay an initial deposit, and sign the builder's Agreement of Purchase and Sale (APS). The APS governs the entire relationship from that day until the final closing — which may be three to five or more years away.

The builder's APS is a pre-printed, heavily one-sided contract. It is designed by the builder's lawyers to protect the builder. It can be many dozens of pages long. You are not expected to simply accept it as-is — a real estate lawyer can review it, explain the risks, and negotiate amendments.

The 10-Day Cooling-Off Period

Ontario law gives new condo buyers a statutory right to rescind (cancel) a pre-construction APS within 10 calendar days of signing. This cooling-off period is provided by the Condominium Act and applies to agreements for units in condominium buildings that have not yet been registered.

During the 10-day period:

• You may cancel the agreement for any reason — no explanation required.
• All deposit funds paid must be returned in full, with interest at a rate set by regulation.
• The cancellation must be delivered in writing to the builder or builder's counsel before the period expires.

The 10-day window is your single most important protection. Use it to have a lawyer review the APS. Signing on a Saturday at the sales centre and spending the following week gathering documents to send to a lawyer puts you in a very tight timeline.

Deposit Schedules

Pre-construction deposits are paid in installments, often structured as:

• A deposit on signing (at the sales centre)
• A second installment 30 days later
• A third installment at 90, 120, or 180 days
• A final installment at a point closer to occupancy

Deposits are held in trust by the builder's solicitor. They are protected under the Condominium Act, which requires deposits to be held in a prescribed form until the builder is entitled to them. Tarion (Ontario's new home warranty program) also provides deposit protection up to a set limit — verify the current limit with Tarion, as it may be updated.

Total deposits on a pre-construction unit can amount to 15–25% of the purchase price. Confirm what happens if you cannot close (see below).

Interim Occupancy

One of the most misunderstood parts of a pre-construction condo purchase is interim occupancy. This is the period between when you are permitted to move in and when the legal title is actually transferred to you. In many condo projects, there can be a gap of six months to over a year between occupancy and title transfer.

During interim occupancy:

• You pay occupancy fees to the builder each month. These fees are not rent and do not build equity. They cover estimated mortgage interest on the outstanding balance, estimated property taxes, and estimated common expenses.
• You do not yet own the unit — you cannot mortgage it or sell it.
• The unit remains in the builder's name until final closing.

Occupancy fees and their components are set out in the APS. Review them carefully. Prolonged interim occupancy can be a significant unplanned cost.

Delay Clauses and Closing Extensions

Builders routinely include delay clauses permitting them to push back the closing date, often multiple times. Ontario law imposes some limits on how long a builder can delay and what notice must be given, but projects that take years longer than originally represented are not uncommon.

A delayed closing means:

• Your rate-hold on your mortgage may expire, requiring re-approval at a different rate.
• Your life plans (rental lease, job, family) may be disrupted.
• You continue making payments and waiting — sometimes years.

Understand the delay provisions in the APS and ask your lawyer about any amendment rights or compensation triggers.

HST and the New Housing Rebate

New construction condominiums are subject to HST. Builders typically advertise prices that are either HST-included or HST-on-top — confirm this before comparing prices to resale properties.

If you are buying as a principal residence, you (or the builder on your behalf) may claim the New Housing HST Rebate. Most builders factor the rebate directly into the purchase price and assign the rebate entitlement to themselves. This is fine when you genuinely intend to live in the unit. If you are buying as an investment and plan to rent it out, you cannot claim the principal residence rebate and the builder will require you to pay back the rebate they credited. Be truthful about your occupancy intention.

Tarion Warranty Coverage

New condominiums in Ontario are covered by Tarion (now operating through the Home Construction Regulatory Authority). Warranty coverage includes:

• One year for defects in materials and workmanship
• Two years for water penetration, plumbing, heating, and electrical defects
• Seven years for major structural defects

Verify current Tarion warranty terms at tarion.com, as programs and timelines may be updated. Enroll your home with Tarion and understand how to submit warranty claims before the windows close.

Frequently asked questions