Buying a Condo
Builders may attempt to sell units in a new condo before construction is complete and the building has been registered. This type of purchase comes with its own risks. Buyers should understand what goes into this decision.
Important documents to Review
Here are six important documents builders provide that you should review carefully with the help of a lawyer so you can protect yourself from risks. Purchasers have a 10-day cooling off period in which they may rescind their agreement of purchase and sale that begins after you receive some of these documents.
1. Pre-construction Agreement of Purchase and Sale
The agreement of purchase and sale includes important information about the purchaser’s and builder’s rights and obligations, the condominium unit, and the construction project.
2. Information for Buyers of Pre-Construction Condominium Homes
This document is included in the purchase agreement and contains an outline of the possible risks of buying a condo unit in a pre-construction project, as well as other information such as the estimated occupancy date for your condo unit and the status of construction.
The builder is required to provide you with a complete and signed version of this document that you are then also required to sign.
3. The Condominium Home Addendum
This document is also part of the purchase agreement and further clarifies when purchasers should expect their condo unit to be ready for occupancy. The Condominium Home Addendum prevails over the purchase agreement and any other attachments if there is any inconsistency among the documents.
4. Tarion Warranty Information Sheet
This document outlines the warranty, inspection and information and protections that come with the condo unit you are purchasing. It also includes information about Tarion.
5. Disclosure Statement
The disclosure statement contains information about the future condo corporation, including:
- A copy of the existing or proposed declaration, by-laws, and rules
- A summary of the agreements to be entered into by the builder before the turn-over meeting, including agreements for condo management services and services like repairs and landscaping
- A copy of the budget statement for the first year after registration of the condo corporation
6. Ontario’s Residential Condominium Buyers’ Guide
Your purchase agreement is not binding until you receive both the disclosure statement and Ontario’s Residential Condominium Buyers’ Guide from the builder. The Guide was developed by the Condo Authority in collaboration with the Ministry of Public and Business Service Delivery as helpful resource for buyers.
Cancellations and deposits
Buyers receive documents outlining firm and tentative occupancy dates as part of their Agreement of Purchase and Sale that set out conditions that could result in the cancellation of the project and termination of the purchase.
These conditions may include, but are not limited to:
- Failure to sell enough condo units
- Inability to secure financing for the project
- Delays in obtaining the required building or planning approvals
Make sure to review the conditions for cancellation of your pre-construction unit carefully before making a purchase.
In most cases buyers are entitled to get their deposit back plus any accrued interest if a condo project is cancelled. Generally, funds received by the builder of a condo project must be held in trust. This includes deposits and certain other payments covered by the purchase agreement.
This interest rate is calculated in accordance with the Condo Act and is currently two per cent below the bank rate set by the Bank of Canada.
You may be able to make a claim with Tarion under the Ontario New Home Warranties Plan Act if your deposit is not refunded. Deposits and other payments are protected for up to a maximum of $20,000 by Tarion.
Changes as of Jan. 1, 2023
The law was recently amended to change the above rate to the “policy interest rate”, which is the rate that banks charge when loaning money to other banks.
This new interest rate will only apply if no condo units for the project were sold prior to Jan. 1, 2023 and if the pruchase agreement is terminated by the developer.
Please note that even after Jan. 1 the interest rate of two percent below the bank rate still applies if:
- The purchaser rescinds the purchase agreement within ten days of receiving it along with the Condo Buyers’ Guide and the disclosure statement
- The purchaser rescinds the purchase following a material change in the information contained in the disclosure statement
Please visit the Bank of Canada website to see the latest interest rates.
Understanding Occupancy Dates
The occupancy date is the date you can move in after construction is completed. It can be found in the Condominium Home Addendum, which is a document that is part of the purchase agreement and contains the Statement of Critical Dates. The Statement of Critical dates must be signed by both the buyer and the builder. The Statement of Critical Dates sets out when the builder expects to finish the condo unit and the latest dates for permitted extensions. Buyers should review these dates closely.
There are situations when construction may be delayed, and buyers may not be able to take occupancy as set out in the purchase agreement.
The Statement of Critical Dates can be helpful here, as it contains several important milestones:
- The Firm Occupancy Date — is the date the condominium unit will be completed. This date is agreed upon by the builder and the buyer.
- The Outside Occupancy Date — if the builder fails to meet the Firm Occupancy Date, they must set out what’s referred to as an outside occupancy date or outside closing date.
If the builder does not meet the Firm Occupancy Date, the buyer may be entitled to receive delayed occupancy coverage from Tarion. If the builder fails to meet the outside occupancy date, the buyer may choose to terminate the purchase within 30 days.
Visit Tarion’s page for more information on occupancy dates.
Interim occupancy occurs in pre-construction condo projects when the builder lets the buyer take occupancy of the condo unit before the declaration has been registered and the title can be transferred to the buyer. During interim occupancy, a buyer cannot make mortgage payments until the condo corporation is registered with the Land Registry Office. The builder will advise buyers of their interim occupancy date as the condo building nears completion. On the interim occupancy date, buyers may take occupancy of their condo unit, but they do not own it yet. Ownership of the condo unit can only be transferred once the condo corporation has been registered with the Land Registry Office.
During the interim occupancy period, the buyer will be required to pay the builder an interim occupancy fee, regardless of whether they move into the condo unit or not. The interim occupancy fee cannot be more than the total of:
- The interest (calculated monthly) on the unpaid balance of the purchase price at the prescribed interest rate
- The estimated monthly municipal taxes for the condo unit
- The projected common expenses fees for the condo unit