Condo Cancellations and Interest on Deposits

Pre-construction condominium projects can sometimes be cancelled even after a buyer has made a deposit on their condo unit. The Condominium Home Addendum (Tentative Occupancy Date) and The Condominium Home Addendum (Firm Occupancy Date) are documents which are given to condo buyers as part of an Agreement of Purchase and Sale. These documents must set out any conditions that could result in the cancellation of the project and the termination of the purchase agreements by the builder/vendor.

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

It is important for buyers to be aware of the potential conditions when they are thinking of entering a purchase agreement. Buyers may wish to review the Condominium Home Addendum for identification of early termination conditions applicable to their purchase agreement. 

In most cases, if a condo project is cancelled, buyers are entitled to get their deposit back, plus any accrued interest, if applicable. Generally, under the Condo Act, 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. 

If your deposit and other payments are not refunded, then you may be able to make a claim with Tarion under the Ontario New Home Warranties Plan Act. Deposits and other payments are protected for up to a maximum of $20,000 by Tarion.

Interest Rates on Deposits

Funds received by the builder of a condo project must be held in trust. This includes deposits and other payments covered by the purchase agreement.

The builder is generally required to refund all monies paid if a project is terminated, plus interest. 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.

Check out section 19. of Ontario Regulation 48/01 to find out more about interest rates on deposits.

Important Changes on Jan. 1, 2023

On Jan. 1, Ontario Regulation 48/01 will be amended to change the above rate to the bank rate, or 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.

Please note that even after Jan. 1 the current interest rate of two per cent 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.