Land Transfer Tax on Pre-Construction Condo Closings in Ontario

You signed an agreement for a condo that did not exist yet, and closing is finally on the horizon. Your lawyer mentions land transfer tax, and you wonder whether it is calculated on the price you agreed to years ago, and when you have to pay it.

This article explains how Ontario land transfer tax generally works on a pre-construction closing: when it is payable, what goes into the taxable value, and how a first-time buyer refund is claimed. It does not cover every municipal tax, and your own numbers should be confirmed by your lawyer.

When the tax is calculated and paid

The tax is payable by the person who acquires the land, and it is payable when the transfer is registered. For a pre-construction condo, that means at closing, when title is transferred to you. How the amount is calculated and collected on your closing is worth confirming with your lawyer.

The tax is calculated at the time of the registered transfer. The legal definition of convey includes agreeing to sell land, so an agreement of purchase and sale can itself be taxable if it is tendered for registration, but if the affidavit states that tax was already paid on the agreement, no further tax is due when the later conveyance is registered.

Is it based on the original price?

Not necessarily. For new homes, the tax applies to the true value of the consideration, which is not limited to the purchase price in the agreement. Several things can be added to the price shown in your contract.

• Extras and upgrades that you selected.
• Installations added by the builder.
• Costs passed to you as part of the conveyance arrangement, such as lot levies, development charges and school levies.

Some items come out. Chattels such as appliances and furniture are excluded from the value of consideration subject to the tax, and they are reported separately. HST is excluded from the value of consideration as well, with special rules where new housing rebates are assigned to the builder.

Check your statement of adjustments and the builder's closing documents carefully. If a charge appears that you did not expect, ask your lawyer whether it forms part of the taxable value.

The provincial rates

For agreements made after November 14, 2016, with registration on or after January 1, 2017, the provincial rates are shown below. Each rate applies to the portion of value within that band.

These are provincial figures. Some municipalities, such as Toronto, have their own separate land transfer tax, so ask your lawyer whether one applies to your closing.

Claiming the first-time buyer refund

If you are an eligible first-time buyer, the refund maximum is $4,000, which means no tax is payable on the first $368,000 of value for an eligible home. For pre-construction purchases, since December 13, 2007 all eligible homes, new or resale, qualify.

You must be at least 18, be a citizen or permanent resident, never have owned an eligible home anywhere in the world, and meet the spouse condition. You must also occupy the home as your principal residence within nine months of the transfer date, and utility bills and home insurance are not accepted as proof.

The refund can be claimed at registration through the Explanation tab of the electronic affidavit, on paper at a Land Registry Office, or afterward through the Ministry of Finance portal. If you apply after paying, you must file within 18 months after registration, and no interest is paid.

What to do before closing

• Ask your lawyer for an estimate of the taxable value, including extras, upgrades and levies.
• Review the builder's statement of adjustments for charges you did not expect.
• Find out which items are chattels and which are part of the home.
• If you are a first-time buyer, confirm whether you qualify and how the refund will be claimed.
• Ask whether a municipal land transfer tax applies where the condo is located.
• Set aside funds for the tax, since it is due at registration.

Because the taxable value can differ from your original price, it helps to raise these questions well before closing day.

Frequently asked questions