Pre-Construction Condominiums and Cancellations

If you’re thinking of buying a new condominium before development has started, you should know that there can be risks involved in purchasing a pre-construction condominium.  

Condominium projects can sometimes be cancelled due to unforeseen circumstances even after you’ve made a deposit on your unit. This is because there are many stages in building a condominium that may remain after you’ve made a deposit. 

Purchase agreements commonly contain a list of the potential conditions that may result in the development not proceeding and therefore the termination of the purchase agreement. This may include: 

  • a failure to sell enough units 

  • an inability to secure financing for the project or 

  • delays in obtaining the required building or planning approvals.  

It’s important for you to be aware of and agree on the potential conditions when you sign the purchase agreement. These conditions are to be identified in an addendum to the agreement. 

Tarion's New Protections for Buyers of Cancelled Condominiums

All new condominiums in Ontario are covered by a warranty that is backed by an organization called Tarion. Tarion administers the New Home Warranties Plan Act that deals with new home warranty protections and builder regulation. The Ontario government is taking steps to better protect buyers of pre-construction condominiums, including establishing a separate regulator from Tarion for new home builders and vendors to address conflicts of interest.

The government has also tasked Tarion with:

  • updating the Ontario Builder Directory to include information about developers with a history of condominium project cancellations.
  • developing options to require developers to post information about their condominium development projects on their websites (e.g. information about outstanding approvals or other matters that could cause a project to get cancelled)
  • working with the Condominium Authority of Ontario to educate prospective buyers about the condominium purchase process
  • improving information collection on new home construction projects
  • making changes to its addenda to agreements of purchase and sale for condominium buyers within the next 12 months to enhance disclosures for consumers about the risks of buying a pre-construction condominium on its addendum. This would include matters that could cause a project to get cancelled, such as outstanding approvals and project financing. The addendum is attached to the agreement of purchase and sale of a condominium.