Thinking of buying a pre-construction condo in Toronto?

Before you fall completely in love with the model suite there are some key things to keep in mind. Many people don’t realize you can work with a realtor when buying pre-construction as opposed to buying directly from the builder. The person in the sales centre works directly for the builder, not for you. It is their job to get the highest price and best conditions for the builder, period. Full stop. They might not explain to you how assignments work or capping costs at closing. Your realtor will negotiate this for you and get you the best price and the best conditions.

Here are some of the key things to know about buying pre-construction and hopefully this will make the process as smooth and sound as possible.

The deposit.

In the world of resale the deposit with purchase is typically 5%.

Builders often require higher deposits in order to fund the construction and this can run as high as 15 or 20%. There is usually a set amount around $5000 (can vary) required at the time of signing and then the balance is paid out. It can look like 5% due within 10 to 15 day of signing, a further 5% in 30 days, 5% at 90 days, 5% at 180 days and 5% at occupancy. So be prepared to pay the builder a greater deposit then resale.

The ‘cooling off’ period.

You get 10 days to change your mind! These are calendar days not business days. While in the Cooling Off period it is a good idea to arrange your financing and have a lawyer review the agreement. If you change your mind for any reason during the 10 days you can back out of the contract and have the deposit returned in full.

Deadlines don’t really exist.

You might find yourself waiting and waiting.

The builder will give you an expected completion date but like a typical home renovation it always takes longer. The Builder has the right to delay for various reasons and time. Delays and builder penalties (if any) will be outlined in the agreement of purchase of sale however you can pretty much count on adding a minimum of 6 months to a maximum of 2 years for delays.

Change happens.

The builders have a fair amount of leeway to make changes to the units and the buildings even after they have been pre-sold. Often floors are added and layouts can be changed. A buyer is protected from material changes but it is surprising to see what is and isn’t considered material. Read the sales agreement with a fine tooth comb and talk with your realtor.


If this is in your agreement of purchase and sale you have the right to sell your unit as an assignment prior occupancy. This means you are selling the right to buy your agreement of purchase and sale. Assignments can be tricky so best to consult with your realtor and have this option put in the agreement of sale.

Interim occupancy period.

Once your unit is built and ready to be moved into there is a period referred as ‘interim occupancy’. You might have bought on the 3rd floor yet the 35th floor is still being worked on but your unit is ready an you can take possession. During this period you do not yet own the condo. The builder is being paid an amount roughly to what the mortgage payment, condo fees and taxes will equal. There is no transfer of land at this point nor mortgage.

As well, it is not unheard of to be living in a slight construction zone.


After a building has passed the various city inspections and becomes a legal entity, a condominium is officially registered. It is at this point ownership is transferred, mortgages kick in and the buyer is the official owner. Typically the registration period happens within 4 to 8 months after the interim occupancy period.

Condo Fees.

In new buildings these are often set low on purpose. This is partly because they are estimated years in advance of the end product and partly because the developers don’t know the actual costs of running the building. Expect these fees to go up in the first 2 years.

There is also the Condo Reserve Fund. When you buy pre-construction you will need to contribute 2 months of condo fees to the reserve fund, most often at the time of closing.

Builder Closing Costs.

These are also referred to as Builder Adjustments which are all sorts of costs which include development and education levies, utility connections and HST on appliances. These builder closing costs can add up however if you have a good realtor working for you these costs can be capped at the time of purchase.


New condos are subject to HST unlike resale. If you are the end user you will likely qualify for an HST rebate. If you are an investor however you will have to pay HST upon closing.

Speak with a realtor about buying pre-construction. They can accompany you to the sales centre, negotiate on your behalf and walk you through this experience.

This might be the biggest purchase of your life to date so why wouldn’t you work with an expert. It is in your best interest.