- A builder can cancel a pre-construction deal only under the early termination conditions allowed by the Tarion Addendum, and each one must be clearly written into your agreement.
- If the builder terminates, it must return your deposit in full within 10 days, and the interest rate depends on the situation.
- If the builder does not refund your deposit, Tarion deposit protection may cover up to $20,000 plus a limited amount of accrued interest.
You bought a unit before it was built, and now the developer has told you the project is cancelled. It is a stressful letter to receive, especially if you have paid deposits and planned your move around that unit.
This article explains, in general terms, when a builder can cancel, how your deposit and interest are treated, and what to do if the money does not come back. Your own purchase agreement and the facts of your project matter, so a lawyer can confirm how this applies to you.
When a builder is allowed to cancel
A builder can cancel a pre-construction deal only under the early termination conditions listed in Schedule A of the Tarion Addendum. Each condition must be clearly described in the purchase agreement, with a date by which it must be met. Conditions of a type the Addendum does not permit are unenforceable.
Typical permitted conditions include failing to sell enough units, being unable to secure project financing, and delays in getting building or planning approvals.
Tarion cannot force a vendor to complete a condominium project it has decided not to proceed with, but you may be eligible for deposit protection. A useful first step is to compare the builder's termination notice with the conditions and dates written in your agreement.
Getting your deposit back
Money a condo builder receives, including deposits, must generally be held in trust under the Condominium Act. If a builder terminates a condo purchase agreement, it must return your deposit in full within 10 days.
If a project is cancelled, buyers are generally entitled to their deposit back plus accrued interest. Keep your agreement, receipts and copies of your deposit cheques or payment records together, because you may need them later.
How interest is calculated
The interest rate depends on how the deal ended. The table below sets out the rules.
| Situation | Interest rate |
|---|---|
| Project cancelled (general rule) | Two per cent below the Bank of Canada bank rate |
| Developer terminates, and no units were sold before January 1, 2023 | Bank of Canada policy interest rate |
| Buyer rescinds during the cooling-off period or after a material change | Two per cent below the Bank of Canada bank rate |
Older projects and unusual agreements can raise questions about which rate applies, so confirm the rate with a lawyer if the amount offered looks wrong.
If the builder does not pay
If a builder does not refund a condo deposit, Tarion's deposit protection covers up to $20,000 plus a limited amount of accrued interest. To claim, call Tarion at 1-877-982-7466 for a Deposit Refund Claim Form and submit it with the purchase agreement and cancelled deposit cheques. Assessment can take up to six months.
If your deposits were larger than that amount, the difference is not automatically covered by that protection, so ask a lawyer about other options.
What about lost appreciation, and what to do next
Many buyers ask whether they can claim for the rise in value they missed out on. Whether that is possible depends on your agreement, why the project ended and the facts of your case. A lawyer can review this with you before you accept any settlement or sign a release.
- Read the termination notice and compare it with the cancellation conditions and dates in your agreement.
- Gather your purchase agreement, disclosure statement, deposit receipts and cancelled cheques.
- Note the date the notice arrived and the date your deposit should be returned.
- Contact the builder in writing about the refund and interest.
- If the refund does not arrive, contact Tarion about a Deposit Refund Claim Form.
- Speak to a lawyer before signing anything that releases your rights.
Frequently asked questions
How fast must the builder return my deposit?
If the builder terminates the agreement, it must return your deposit in full within 10 days. If it does not, you can look at Tarion deposit protection.
Do I get interest on my deposit?
Generally yes. Buyers are generally entitled to accrued interest at two per cent below the Bank of Canada bank rate when a project is cancelled. Where no units were sold before January 1, 2023 and the developer terminates, the Bank of Canada policy interest rate applies.
Can I force the builder to finish the project?
Tarion cannot force a vendor to complete a condominium project it has decided not to proceed with. Whether any other remedy exists depends on your agreement and the facts, so ask a lawyer.
Can the builder cancel for any reason?
No. A builder can cancel only under early termination conditions allowed by the Tarion Addendum, and each must be clearly described in your agreement with a date. Conditions of a type the Addendum does not permit are unenforceable.
Sources
- Condominium Authority of Ontario – Pre-construction Condos — condoauthorityontario.ca
- Tarion – Deposit Protection — tarion.com
- Tarion – Condominium deposits (builders) — tarion.com
- Tarion – Condo Units: coverage for occupancy dates, delays & cancellations — tarion.com
Links go to official government, court and regulator pages. The law changes — confirm you are reading the current version.
This is a real estate question
Start a file online — flat, published fees, reviewed by a licensed lawyer before a dollar is owed.