What to Know Before Buying a Pre-Construction Condominium

Condominiums continue to be a very popular choice for new home buyers. The experience of buying a pre-construction condominium unit is slightly different than a new home purchase. To assist you in making an informed decision, here are some things that you should consider before you buy:

Ontario Builder Directory

When thinking about buying a pre-construction condominium, it’s important to do your research. We recommend you begin your research with the Ontario Builder Directory to ensure the builder you are considering working with is licensed to build homes in Ontario. The directory also allows you to search for condominium projects to find out more about the condominium project’s current status and the builder’s history.

This directory also provides a 10-year background for all licensed builders, as well as those who are no longer licensed to build homes. If your builder is not listed, it may be for many reasons including not passing the technical test based on the Ontario Building Code regulations, or not providing the financial securities mandated to build homes in Ontario – and they may be building illegally.

Ontario Builder Directory

purchase agreement

Your purchase agreement contains important information about your rights, your builder’s rights, your unit, and the project. To ensure that you are protected and understand exactly what you’re signing up for, you should have your agreement carefully reviewed by a lawyer who is experienced in pre-construction condominium transactions. Also keep in mind that you have an initial 10-day period to cancel your purchase under the Condominium Act, 1988. So, if on further review you decide that you no longer wish to go through with your purchase, you’re able to terminate your agreement within that period and get your deposit back.

For projects or phases of a project which go to market after January 1, 2020, all agreements of purchase and sale for condo buyers will include an information sheet at the front of the purchase agreement that outlines some of the key potential risks of buying a pre-construction condominium. These may include potential early termination conditions such as reaching a minimum sales threshold for the project to proceed, the developer securing necessary financing for construction and completion of the project, and obtaining the required approvals from the municipality.

construction delays

Since a condominium project requires a lot more time to complete than a single-family home, the potential for construction delays is much higher. When it comes to setting your move-in, or “occupancy date,” chances are your builder will set a Tentative Occupancy Date. This allows them to extend the date multiple times provided they give you enough advance written notice for each delay. You can review the addendum attached to your purchase agreement to understand how occupancy dates may be extended, when you can terminate your agreement because of delay, and when you might be eligible under the warranty for compensation due to delay.

Project Cancellations

There’s always a risk that a condominium project could get cancelled. Some of the most common reasons for project cancellations include insufficient sales, lack of funding, and failure to obtain development approvals. Review the addendum attached to your purchase agreement to understand the early termination conditions that, if not satisfied, may result in the project being cancelled. If a project gets cancelled, you are eligible to receive your deposit back, including any additional payments you made for upgrades. Deposits

must be placed in trust and if payments are not refunded, you’re eligible for protection from Tarion of up to $20,000. For more information about condominium cancellations, please visit Tarion's Condominium Cancellation page.

interim occupancy

Although you may be able to take occupancy of your unit, you do not officially own it until the entire project is registered with the municipality. The time in between is known as the Interim Occupancy Period. During interim occupancy (which can last anywhere from a few months to more than a year) you must pay a monthly fee to your builder that covers three things: interest on the unpaid balance of your unit, estimated municipal taxes for your unit, and maintenance expenses.

ongoing construction

If you are among the first to be granted occupancy, you will be living in your unit while the rest of the building is being completed. As a result, you should expect to deal with construction related issues such as noise, debris, and disruptions. Also bear in mind that some of the amenities you are looking forward to using, such as a pool or fitness room, may not be ready for some time.