Things to Know Before Buying a Pre-Construction Condo

Toronto Condo Living, Toronto Real Estate News

Due to high demand, the pre-construction market is booming once again, offering condo buyers the unique opportunity to get in on the ground floor. Literally. Condo buyers are certainly not without options if they’re willing to consider purchasing in pre-construction. If you’ve been looking high and low for a place that feels just right, don’t worry. Your dream condo might not even have been built yet. However, buying in pre-construction doesn’t come without its downfalls; there are a few things to keep in mind.

Construction Season by Richard Minton
Construction Season by Richard Minton

Condo fees are generally set extremely low in pre-construction

This occurs for two reasons: the fees are a rough estimation made several years in advance, and no one can really be sure how much it costs to run a building before it’s fully constructed. Unfortunately, this means that you could easily end up blindsided by fees that rise substantially—usually between 10 and 20 per cent —within the first two years. Be prepared for this inevitability long before you move in.

Builders make changes to buildings, even if they’ve been pre-sold

This is one of the sneaky ways that builders capitalize on the pre-construction market. If you’re aware that changes could occur and you’ve reviewed your sales agreement thoroughly, this probably won’t be an issue; most "material changes" will not affect the buyer, due to protective clauses in the sales agreement. But make sure you read the fine print. Not all changes will qualify, and buyers may end up paying steeper fees if builders decide to make significant alterations to the units and the building itself.

You’ll be expected to make a large deposit

If you’ve ever purchased a resale condo, you know that deposits are usually no more than 5 per cent, but builders of condos in the pre-construction stage typically require a bit larger of a deposit. The deposits range from 10 per cent to 15 per cent to fund the expected construction fees. There will be a flat rate (usually at least $3,000 CAD), but it may be timed with the different stages of construction, so you don’t have to pay everything upfront.

Construction zone by Grant Hollingworth
Construction zone by Grant Hollingworth

The ten-day "cooling off" period

This is a godsend for many buyers in Ontario. Everyone who purchases a brand new condo in the province has a total of ten calendar (not business) days to back out of their contract and have their deposit returned in full. If, for any reason, you should need to back out of your contract, be sure to contact your lawyer and get them to review your sales agreement. Getting financing pre-approval is advisable, too.

There is an interim occupancy period

Most buyers aren’t aware that they don’t actually own their condo until the interim occupancy period is up. In the meantime, you will be permitted to move in and take possession of your unit, paying the builder an amount that adds up to the equivalent of your monthly mortgage payment, utility fees, and taxes. Keep in mind that during this period of time you are not technically the owner of the property and no transfer of land has taken place, although it will cost you the same as if you were.

346 Davenport Road, Suite 603
346 Davenport Road, Suite 603

Condominiums need to be registered after careful review

A building must undergo a thorough inspection by the city before anyone can take possession of their units. In addition, it may take a while for all the documents to be processed ensuring that the building is a legal entity. This registration period can take up to two years, but typically, it begins around the time of the interim occupancy period. In other words, you’ll likely become the owner of your condo during the registration period. This process can be inconvenient and annoying, but for most buyers, it’s worth it, because they’ll have the official seal of approval indicating that their condo meets Toronto’s rigid standards of safety and health.

Construction might be halted or delayed without warning

If you’re hoping to move into your new dream condo as soon as humanly possible, buying in pre-construction might not be for you. You might be better off looking elsewhere. You’ll very likely be expected to wait for a longer period of time than you’d like. For some people, this is a small sacrifice, since they end up with a beautifully constructed condo with an enviable view. However, for others, it’s a frustrating part of the process. Builders usually have an approximate completion date in mind, but due to unforeseen circumstances, they rarely meet their deadline. Expect to wait at least six months—and sometimes up to several years—for construction to be fully completed.

Balcony by Freaktography
Balcony by Freaktography


The old adage remains true: it’s one of the only things you can count on in life. You will be charged HST if you purchase in pre-construction, since new condos are subject to federal taxes. Resale condominiums, on the other hand, are not. If you’re purchasing for the sake of investment, you’ll be hit especially hard. Live-in buyers qualify for HST rebates, while investors will be forced to pay upwards of thousands of dollars in HST upon closure. If you’re concerned about how this might affect you financially, consult legal advice.


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