Buying Pre-Construction in Ontario: 7 Things to Watch Out For Before You Sign

When you buy pre-construction, you’re buying a promise of future delivery, often before the building is even out of the ground. That makes the contract, not the unit, the thing that protects you. The journey stretches over several years and runs through three pressure points: the cooling-off period, interim occupancy, and final closing.

• The agreement rules everything. A developer’s Agreement of Purchase and Sale can run 100+ pages — the risk lives in the fine print.
• Timelines slip. Closing dates get pushed; that’s exactly why Tarion’s delayed-occupancy compensation exists.
• Costs come in two waves. Staged deposits first, then a stack of closing costs at the end.

Use the 10-day cooling-off period to have a lawyer review the contract

According to the Condominium Authority of Ontario (2025), Section 73 of the Condominium Act, 1998 gives every pre-construction condo buyer a 10-day cooling-off period. The clock starts on the later of two dates: the day you receive the fully signed Agreement of Purchase and Sale, or the day you receive the developer’s disclosure statement plus the Condo Buyers’ Guide. These are calendar days — weekends count. Don’t waste this window agonizing; use it to have a real estate lawyer read the agreement line by line. Miss it and you’re locked in.

Understand the staged deposit — and confirm it sits in trust

Toronto pre-construction deposits are paid in stages, typically totalling 15%-20% of the purchase price — often 5% on signing, then installments at 30, 90, 120, and 180 days. According to Tarion (2025), Ontario law requires the developer to hold buyer deposits in trust. If you become entitled to a refund and the developer fails to pay, Tarion’s deposit protection backstops you: up to $60,000 for homes priced $600,000 or less, and 10% of the price up to a maximum of $100,000 above that (for agreements signed on or after January 1, 2018).

Have your lawyer negotiate a development charge cap within the 10 days

Development charges and municipal levies are the most common hidden bomb in a pre-construction deal — billed in one lump at final closing and potentially thousands of dollars. Under Ontario’s Development Charges Act, these are fees municipalities charge developers to fund growth-related costs like roads, transit, and parks, and the developer passes them to you. The move that matters: within the 10-day cooling-off window, have your lawyer negotiate a cap on development charges, converting an open-ended cost into a fixed, known number so closing day doesn’t ambush your budget.

Budget for interim occupancy fees (a.k.a. phantom rent)

Delivery happens in two steps: interim occupancy first, then final closing. In between, you’re living in the unit but don’t yet own it — and you pay a monthly occupancy fee, often called phantom rent. It has three parts: interest on the unpaid balance (calculated at the Bank of Canada prescribed rate under the Condominium Act), estimated property taxes, and projected maintenance fees. According to Ontario real estate lawyers (Sorbara, Insight, 2025), developers are strictly prohibited from profiting on this — it only covers carrying costs, and none of it counts toward your principal. Treat it as pure overhead and build it into your budget.

Check the assignment clause before you treat it as an investment

If your plan is to flip the unit before final closing, the assignment clause is everything: whether you can assign at all, whether the developer’s written consent is required, the assignment fee, how HST is handled, and whether the development charges follow to the new buyer. Many developers gate assignments behind approval or steep fees. Pin all of this down before signing — don’t discover at resale time that the contract simply doesn’t allow it.

Reserve for the full stack of closing costs

On final closing day, the Statement of Adjustments settles a long list: the remaining balance, HST (your rebate eligibility differs for end-user vs. investor), land transfer tax, legal fees, development charges, utility hook-ups, and Tarion enrolment fees. New-build closing costs are usually messier than resale. My advice: before you sign, have your lawyer itemize and estimate these so you’re not fixated on the deposit while the real money lands at closing.

According to HCRA (the Home Construction Regulatory Authority, 2025), every new-home builder and vendor in Ontario must be licensed. Before you commit, look the developer up in the Ontario Builder Directory (obd.hcraontario.ca): licence status, number of homes built, regulatory actions, court charges, even insolvency or receivership status are all searchable. If a builder isn’t listed at all, they may be operating illegally — walk away.

Q: Can I cancel a pre-construction condo purchase during the 10-day cooling-off period for any reason?

Yes. Under Section 73 of the Condominium Act, 1998, a buyer purchasing a new condo directly from a developer has a 10-day cooling-off period to cancel for any reason and receive a full deposit refund (plus interest) with no penalty. The clock starts on the later of the day you receive the signed Agreement of Purchase and Sale or the day you receive the disclosure statement plus the Condo Buyers’ Guide, and it counts calendar days — weekends included. You or your lawyer must deliver written notice of rescission to the developer within those 10 days.

Q: How much deposit do I need for a pre-construction condo, and is my money protected?

Toronto pre-construction deposits are paid in stages, typically totalling 15%-20% of the price — often starting at 5% on signing with installments at set intervals. According to Tarion (2025), Ontario law requires deposits to be held in trust. If you’re entitled to a refund and the developer doesn’t pay, Tarion’s deposit protection covers up to $60,000 for homes priced $600,000 or less, and 10% of the price up to $100,000 above that (for agreements signed on or after January 1, 2018).

Q: Is the interim occupancy fee part of my purchase price?

No. The occupancy fee is a monthly transitional cost you pay during interim occupancy — when you’ve moved in but haven’t yet closed. It’s made up of interest on the unpaid balance, estimated property taxes, and projected maintenance fees, and none of it counts toward your principal. Developers are prohibited under the Condominium Act from profiting on it; it only covers carrying costs. Still, you should budget for it separately as a sunk cost.

Q: Can development charges be capped before closing?

Yes — and it’s one of the most important things to negotiate. Development charges are billed in one lump at final closing and can be open-ended and large. The best practice is to have your real estate lawyer negotiate a development charge cap with the developer during the 10-day cooling-off period, turning an uncertain cost into a fixed amount written into the contract, so you aren’t hit with a surprise bill at closing.

Q: How do I check whether a pre-construction builder is reputable in Ontario?

Search the Ontario Builder Directory at obd.hcraontario.ca. According to HCRA (2025), every new-home builder in Ontario must be licensed, and the directory shows licence status, number of homes built, regulatory actions, and insolvency status. If a builder isn’t listed, they may be operating without a licence and you should avoid them.