Buying a New or Pre-Construction Property

Purchasing a newly built or pre-construction home can involve different documents, costs, timelines, and legal considerations than purchasing a resale property.

Builder Agreements of Purchase and Sale are often lengthy and may include detailed schedules addressing construction, deposits, closing dates, additional charges, occupancy, HST rebates, changes to the property, and the rights and obligations of both the purchaser and builder.

Nobari Law Professional Corporation assists purchasers with the closing of new and pre-construction houses, townhomes, and condominium units in Ontario.

A new construction purchase generally involves buying a newly built home directly from a builder or developer.

A pre-construction purchase is entered into before the home or condominium unit has been completed. Depending on the stage of the development, construction may not yet have started when the Agreement of Purchase and Sale is signed.

The purchaser may be buying:

• a newly built freehold house or townhome; 
• a pre-construction freehold home; 
• a newly built condominium unit; 
• a pre-construction condominium unit; or 
• a condominium townhouse or similar property purchased from a developer. 

The legal process and purchaser protections may differ depending on whether the property is freehold or condominium.

A builder Agreement should be reviewed promptly after signing, or before signing where the builder permits legal review. The scope of any legal review must be confirmed separately. A retainer to complete the purchase closing does not necessarily include a full review of the Agreement, schedules, disclosure materials, or Tarion documents.

The review period may be short.

The applicable Tarion Addendum should be attached to the builder’s Agreement of Purchase and Sale when it is provided to the purchaser for signing. It forms part of the Agreement and includes important information about critical dates, possible delays, termination conditions, and anticipated closing costs and adjustments.

Purchasers of new or pre-construction condominium units generally have a 10-day period in which they may cancel the Agreement after receiving the fully signed Agreement, disclosure statement, and Ontario’s Residential Condominium Buyers’ Guide. During that period, the purchaser may obtain legal advice and decide whether to proceed. 

The statutory condominium cooling-off period should not be assumed to apply to every type of new home purchase. Purchasers of new freehold homes should obtain legal advice promptly and review any rights or deadlines contained in the Agreement and Tarion Addendum.

When Nobari Law is retained to complete a new-construction purchase, the work generally focuses on the legal steps and documents required for closing. Depending on the transaction, this may include:

• reviewing the purchase price, deposits, and credits;
• confirming the property, parking space, or locker being purchased;
• reviewing occupancy and final closing information;
• reviewing the statement of adjustments and applicable builder charges;
• addressing HST and rebate documentation relevant to closing;
• completing title and mortgage requirements; and
• preparing and reviewing the documents required to complete the closing.

The scope of the retainer depends on the services agreed upon. A full review of the builder’s entire Agreement, schedules, disclosure materials, or Tarion documents is not included unless separately arranged.

The purchase price shown on the first page of a builder Agreement may not represent the total amount payable on closing.

The Agreement may require the purchaser to pay additional amounts for matters such as:

• development and education charges; 
• utility installation or connection costs; 
• water or hydro meter charges; 
• municipal levies; 
• grading or subdivision-related costs; 
• Tarion enrolment or warranty-related charges; 
• condominium or developer administration fees; 
• legal and electronic-document charges; 
• property-tax adjustments; 
• common-expense adjustments; 
• deposits or adjustments for rental equipment; and 
• other charges permitted by the Agreement. 

Many builder charges are established by the Agreement before the lawyer is retained for closing and may not be negotiable at that stage. Questions about possible additional charges should be raised as early as possible.

HST generally applies to newly constructed homes. The stated purchase price may already include HST based on the assumption that the purchaser qualifies for and assigns an available new housing rebate to the builder. 

Eligibility may depend on matters such as:

• who is purchasing the property; 
• whether the home will be used as a primary place of residence; 
• whether it will be occupied by a qualifying relation; 
• whether the property will be rented; 
• the purchase price; 
• the date the Agreement was entered into; and 
• the applicable rebate rules at the time of closing. 

If the purchaser does not qualify for a rebate that was credited in the purchase price, the builder may require additional HST to be paid on closing. Rental-property purchasers may need to pay the HST amount and apply separately for an available rental-property rebate. 

HST and rebate rules can change and may involve significant amounts. Purchasers should obtain advice from a qualified accountant or tax professional where eligibility is uncertain.

Before purchasing, a buyer may wish to review the builder’s information through the Ontario Builder Directory.

New home builders and sellers in Ontario are generally required to be licensed by the Home Construction Regulatory Authority. The directory may include information about licensing status, completed homes, warranty history, regulatory action, and the status of certain condominium projects. 

The directory is one source of information and does not replace the purchaser’s own financial, construction, or other due diligence.

Builder Agreements commonly require deposits to be paid in instalments over the construction period.

The timing, amount, recipient, and method of payment should be confirmed from the Agreement. Purchasers should retain proof of every payment.

Ontario’s new home warranty framework includes deposit protection, subject to the applicable limits, requirements, type of property, and circumstances of the claim. 

Purchasers of new freehold homes should review Tarion’s registration requirements promptly after signing, as registration may be required within 45 days. Current registration and deposit-protection information is available on the Tarion website.

A new home Agreement may contain tentative, firm, and outside closing or occupancy dates.

The Tarion Addendum explains the permitted date structure, notice requirements, possible extensions, termination rights, and delayed closing or occupancy protections. Builders of new freehold homes and condominium units must provide the applicable delayed closing or occupancy warranty information with the Agreement. 

Purchasers should review all notices received from the builder and provide them to their lawyer promptly. A change in the scheduled date may affect:

• mortgage arrangements; 
• the sale of an existing home; 
• moving plans; 
• temporary accommodation; 
• insurance; 
• rate guarantees; and 
• the funds required for closing. 

Many pre-construction condominium purchases involve two stages: interim occupancy and final closing.

During interim occupancy, the purchaser may occupy the unit, but legal title has not yet transferred because the condominium corporation has not been registered. The purchaser is generally required to pay a monthly interim occupancy fee, which may include:

• interest on the unpaid balance of the purchase price;
• estimated municipal property taxes; and
• projected condominium common expenses.

Final closing generally occurs after the condominium corporation has been registered. At that stage, legal title is transferred to the purchaser, the balance of the purchase price is paid, and any mortgage is generally advanced and registered.

Interim occupancy fees are not mortgage principal payments and do not increase the purchaser’s equity in the unit.

An assignment involves transferring the purchaser’s interest in the Agreement to another buyer before final closing.

Builder Agreements commonly restrict assignments or require:

• the builder’s prior written consent; 
• payment of an assignment fee; 
• payment of the builder’s legal and administrative costs; 
• approval of the new purchaser; 
• completion of specific assignment documents; and 
• compliance with marketing or listing restrictions. 

The builder may have discretion to refuse an assignment. Tax consequences may also arise for the original purchaser.

A purchaser who may need to assign the Agreement should have the assignment provisions reviewed early and obtain appropriate tax advice.

A mortgage pre-approval obtained when the Agreement is signed may expire long before the property is ready to close.

Purchasers should remain in contact with their lender or mortgage broker and confirm:

• how long the mortgage approval or interest-rate commitment remains valid; 
• whether updated financial documents or a new appraisal will be required; 
• whether the lender will finance the completed property; and 
• how interim occupancy fees and additional closing costs will be funded.

The purchaser remains responsible for completing the transaction even if the property’s market value, interest rates, income, or lending requirements change before closing, subject to the terms of the Agreement.

Before possession or occupancy, the builder will generally arrange a Pre-Delivery Inspection, commonly called a PDI.

The PDI allows the purchaser to view the home, learn about its systems, and record items that are incomplete, damaged, missing, inaccessible, or not operating properly. The completed PDI form becomes an important record of the home’s condition before possession. 

The purchaser should attend carefully, keep a copy of the completed form, and review Tarion’s procedures for reporting warranty concerns after possession.

The PDI is not a substitute for a professional home inspection. A purchaser may consider bringing an appropriate qualified professional where permitted.

Qualifying new homes built and sold by licensed Ontario builders generally receive statutory warranty protection backed by Tarion.

Coverage is divided into different periods and may address specific defects, building-code matters, water penetration, major structural defects, delayed closing or occupancy, deposits, and other prescribed protections. 

Warranty deadlines and reporting procedures are important. Purchasers should register for Tarion’s homeowner services, retain their documents, and submit warranty forms within the applicable time limits.

A lawyer’s Agreement review and real estate closing services do not include inspecting the home, determining whether construction is defective, or administering the purchaser’s Tarion warranty claims.

Before final closing, the purchaser will generally need to:

• provide identification and requested information; 
• confirm mortgage financing; 
• arrange property insurance effective when required; 
• provide the lawyer with builder notices and amendments; 
• review and sign the closing documents; 
• confirm how ownership will be registered; 
• provide the required closing funds; 
• complete any required HST rebate documents; 
• attend the PDI or appoint an authorized representative; and 
• arrange utilities, moving, and access. 

The final amount required may not be known until the builder’s closing documents, statement of adjustments, and mortgage instructions have been received.

Nobari Law Professional Corporation provides legal assistance with new and pre-construction residential purchase closings in Ontario.

Our services may include:

• reviewing provisions of the builder’s Agreement and related documents relevant to completing the closing;
• reviewing the statement of adjustments and applicable closing charges;
• addressing HST rebate documentation relevant to closing;
• communicating with the builder’s lawyer;
• reviewing title and completing required searches;
• reviewing and completing mortgage instructions;
• calculating land transfer tax and available refunds;
• preparing and reviewing closing documents;
• completing the electronic transfer and mortgage registration;
• completing interim occupancy and final condominium closings, where applicable; and
• confirming completion and reporting to the purchaser and mortgage lender after closing.

The scope of the legal work will depend on the type of property, financing, construction stage, closing arrangements, and the services included in the retainer.

To begin preparing for your purchase, download our Property Purchase Checklist for a general list of documents and information that may be required.

Not every item will apply. Additional information may be requested after the builder Agreement, financing, and circumstances of the transaction have been reviewed.

Do not send original documents, identification, complete account numbers, passwords, or other sensitive information unless requested by Nobari Law Professional Corporation. If requested, please follow the document-sending instructions provided by the firm.

Download the Property Purchase Checklist

Early preparation can help a purchaser understand important deadlines, anticipated closing costs, and the steps required to complete a new home purchase.

Contact Nobari Law Professional Corporation to discuss the purchase of a new or pre-construction house, townhome, or condominium unit in Ontario.