The Pre-Construction Condos Buying Process in Ontario

1. Research & Budgeting: Understand what you can afford and what you want.
2. Find a Project: Identify a developer and project you trust.
3. Register & Get Pre-Approved: Get on the developer’s interest list and secure financing pre-approval.
4. Review Documents: Scrutinize the Agreement of Purchase and Sale (APS) with a lawyer.
5. Sign the Contract: Execute the APS, paying the initial deposit.
6. The Waiting Period: Monitor progress during construction.
7. Interim Occupancy: Potentially pay “rent” to the builder before final closing.
8. Final Closing: Get your keys and take full ownership.

Phase 1: Preparation & Research (Before You Buy)

1. Understand the Pros and Cons

• Pros:
  • Potential Equity Gain: You lock in a price today for a home that may be worth more upon completion.
  • Customization: Often, you can select upgrades, finishes, and layouts.
  • New Everything: Modern building codes, warranties, and no need for immediate repairs.
  • Extended Deposit Structure: You pay deposits over many months, not a single large down payment.
• Cons:
  • Delays: Construction is almost always delayed. Be prepared for this.
  • Uncertainty: The final product might differ slightly from renderings or showrooms.
  • Financial Risk: If the market dips, you could owe more than the home is worth at closing.
  • Interim Occupancy Costs: You may have to pay fees to the builder before you officially own the home.
  • Developer Risk: In rare cases, a project can be cancelled or the developer can go bankrupt.

2. Get Your Finances in Order

• Pre-Approval: Get a mortgage pre-approval to know your budget. Remember, the final mortgage will be approved at closing, not at signing, based on the value and your financial situation at that future date.
• Budget for Extras: The purchase price is just the start. Budget for:
  • HST: Unless it’s explicitly included, you will likely have to pay HST on top of the price. First-time buyers may be eligible for a rebate.
  • Tarion Warranty Enrolment Fee: Mandatory for all new homes.
  • Development/Education Levies: Builders sometimes add these costs to the final closing bill.
  • Utility Hook-ups: Fees for hydro, gas, and water meter installation.
  • Land Transfer Tax: Payable upon final closing. First-time buyers in Ontario may be eligible for a rebate.
  • Legal Fees: For reviewing the contract and handling closing.
  • Closing Adjustments: Property taxes and other utilities may be adjusted.

3. Choose a Reputable Builder & Project

• Research the Builder: Look into their past projects. Have they been completed on time? What is their reputation for quality? Check the Tarion website for a builder’s history of conciliations and warranty claims.
• Location: Is it a developing area with good future resale value? Check municipal plans for future transit, schools, and amenities.
• Project Type: Condo, townhouse, or single-family home? Each has different rules, fees (condos have monthly maintenance fees), and governing documents.

Phase 2: The Purchase Process

4. Registration and Selection

• Register Interest: Sign up on the developer’s website to get project updates and launch announcements.
• Broker Participation: Many sales are handled through brokerage firms. It can be beneficial to have a real estate agent who specializes in pre-construction represent you. Their commission is typically paid by the builder, not you.

5. The Agreement of Purchase and Sale (APS)

This is the most critical document. DO NOT SIGN IT WITHOUT A REAL ESTATE LAWYER REVIEWING IT FIRST. A lawyer experienced in pre-construction is essential.

Key Clauses Your Lawyer Will Review:

• Price and Payment Schedule: Exact deposit amounts and due dates (e.g., $5,000 on signing, 5% in 30 days, 5% in 90 days, etc.).
• Tarion Addendum: Explains your warranty coverage.
• “Cooling-Off” Period: In Ontario, you have a 10-day recission period to cancel your purchase for any reason after signing the APS and receiving the disclosure package. This is a critical consumer protection.
• Closure Date & Delays: The closing date is an estimate. The builder has clauses (called “force majeure”) that allow for delays without penalty.
• Interim Occupancy Clause: Explains the fees you’ll pay if you move in before the building is registered.
• Change & Amendment Clauses: How the builder can change plans, and what your rights are.
• Assignment Clause: This dictates whether you can assign (sell) your contract to another buyer before closing. This is a crucial flexibility clause.

Phase 3: The Waiting Period & Closing

6. During Construction

• Keep Records: Save all contracts, correspondence, and receipts for deposits.
• Monitor Progress: Drive by the site if you can. The builder will provide occasional updates.
• Stay Financially Prepared: Keep your finances in order for the final mortgage approval.
• Design Studio Selections: You’ll be invited to choose your finishes and upgrades (which cost extra).

7. Pre-Delivery Inspection (PDI)

• Shortly before occupancy, the builder will schedule your PDI.
• You and a builder representative will walk through the unit to identify any defects, damage, or incomplete items.
• Document everything on the Tarion PDI form. This forms the basis of your 30-day warranty claim list.

8. Interim Occupancy (Mainly for Condos)

• This occurs when the building is complete enough for you to move in, but not yet legally registered (e.g., common elements aren’t finished).
• You get your keys and can move in, but you do not own the unit yet.
• You will pay the builder an Occupancy Fee, which is roughly equivalent to interest on the unpaid purchase price plus estimated condo fees and taxes.
• This period can last from a few months to over a year.

9. Final Closing

• Once the building is fully registered with the city, the title transfers to you.
• Your lawyer will handle the final closing: paying the balance of the purchase price to the builder (with your mortgage funds), paying land transfer tax, and registering the title in your name.
• You now officially own the home and will stop paying occupancy fees to the builder and start paying your mortgage and condo fees (if applicable) directly.

Key Protections in Ontario

• Tarion Warranty Corporation: This is the mandatory new home warranty program in Ontario. It provides coverage for:
  • 1-Year: Workmanship and materials defects.
  • 2-Year: Major structural defects and violations of the Ontario Building Code.
  • 7-Year: Major structural defects.
• 10-Day Cooling-Off Period: Your legal right to back out after signing.

Final Essential Tips

1. Use Professionals: A real estate lawyer (specializing in new homes) is non-negotiable. A good real estate agent can also be invaluable.
2. Read Everything: Understand every line of the APS.
3. Plan for Delays: Assume your closing date will be at least 6-12 months later than stated.
4. Budget for Extra Costs: The sticker price is not the final price. Factor in all closing costs.
5. Be Patient and Manage Expectations: The process is long and can be stressful. Being prepared and well-informed is the best way to ensure a smooth experience.