Can You Back Out of a Pre-Construction Condo Agreement in Ontario?

You signed for a unit that will not exist for years, and now your finances, plans or the market look different. Before you assume your deposit is gone, it helps to know which exits Ontario law gives you.

There is no general right to walk away at any time. There are specific windows and grounds, and missing them can be costly, so the timing matters.

The 10-day cooling-off period

A buyer of a pre-construction condo has a 10-day cooling-off period to rescind the agreement of purchase and sale. The agreement also does not bind you until you receive both the disclosure statement and Ontario's Residential Condominium Buyers' Guide.

That second point is easy to miss. If you were never given one of those documents, ask a lawyer how it affects the start of your rights. Do not rely on a date that you assumed.

Rescinding after a material change

A buyer may also rescind after a material change in the information in the disclosure statement. Builders sometimes revise plans, unit sizes or other details between signing and closing. Whether a given change is material is a question of fact, and a lawyer can compare the original statement to the amended one.

Terminating over delays

If the unit is not ready by the Outside Occupancy Date, you have 30 days to terminate the agreement. The Tarion Addendum overrides any conflicting terms, and early-termination conditions that the Addendum does not allow cannot be enforced.

Not every delay lets you leave. While the occupancy date is tentative, the builder may extend it several times without paying compensation, but must give 90 days' notice of each extension. For unavoidable delays, the builder may extend all deadlines by up to the length of the delay.

Time limits for making a delayed-occupancy claim are described in more than one way, so confirm the deadline that applies to you with Tarion or a lawyer as soon as a delay notice arrives. Keep every notice the builder sends you, because the dates on them often decide what you can do.

What happens to your deposit

Builders must generally hold deposits and other money received for a condo project in trust. Tarion protects deposits and other payments, including upgrades and extras, up to $20,000 plus a limited amount of interest. That protection applies where the builder goes bankrupt, fundamentally breaches the agreement, or the buyer rescinds before closing and the deal does not close.

For deposits above $20,000 per unit, Tarion's builder security requirements say condo vendors must use a separate trust account, the trust account run by the escrow agent, or excess deposit insurance. If a condo builder ends the agreement, it must return your whole deposit within 10 days.

Payments made to reserve or hold a unit before you sign the purchase agreement have no Tarion deposit protection.

If you simply decide not to close and have no valid ground, what happens to your deposit depends on the wording of your agreement and the facts. Do not assume you can recover it, and do not stop paying instalments without advice.

Costs to weigh before you decide

If you are thinking about staying in the deal, it helps to see the costs that come before and at closing. Some of them surprise buyers.

• Interim occupancy fees apply only during the interim occupancy period. They are not credited to the purchase price, and you owe them whether or not you move in.
• Under the Condominium Act, the fee cannot exceed the total of monthly interest on the unpaid balance of the price at the prescribed rate, the estimated monthly municipal taxes, and the projected common expense fees for the unit.
• Ownership of a new condo unit can only transfer once the condominium corporation has been registered, and interim occupancy fees stop when title transfers.
• The vendor pays Tarion's enrolment fee, but vendors commonly pass it on to buyers in the statement of adjustments on closing. Not all vendors do this.

Condo builders must list extra charges and expected adjustments to the final price, with dollar values, in Schedule B of the Tarion Addendum. Compare those numbers with your budget before you decide whether to close or look for a way out.

What to do next

• Find the date you received the disclosure statement and the Buyers' Guide.
• Ask a lawyer to confirm when your 10-day cooling-off period started and when it ends.
• Compare any amended disclosure statement with the original.
• Collect every notice of occupancy date changes and note the dates.
• Read Schedule B and the Tarion Addendum, which list extra charges and adjustments.
• Have a lawyer review the agreement before you send a notice or stop paying.

Frequently asked questions