Five Basics of Purchasing New Condominium Homes

By Jeunguk Jennifer Choi

Disclaimer: This article is not a substitute for legal advice. No action in regard to your particular matter should be taken until you have first sought full legal or professional advice from a lawyer fully retained to act on your behalf.


The condominium market has been constantly growing in Ontario. With the continuing shortage of attractive rental options and high interest, almost one-half of new construction in recent years is condominium related. Condominiums are seen as both a good investment property and a convenient home in which to live. In order to benefit from discounts or value increases (which occur during the wait for construction to completed) or options and customization of designs and appliances, many buyers opt to purchase pre-construction or newly built condominiums without knowing the important differences between purchasing a resale home and purchasing a new condominium home. The following 5 topics are the basics of purchasing new condominium homes.

The 10-day Rescission Period

The “rescission period” is also commonly known as the “cooling off” period. In Ontario, the Condominium Act provides all buyers of new construction condominiums with a 10-day window to reconsider their purchase. This is the 10-day cooling off period and it begins at the time the buyer receives a copy of the agreement of purchase and sale signed by the vendor and the buyer, or when the buyer receives the disclosure statement, whichever comes later. During these 10 calendar days, the buyer can back out of the contract without any penalty. Any deposit paid when signing the agreement will be returned to the buyer. It is important for the buyer to use the 10-day cooling off period to have their lawyer review the purchase agreement and get financing pre-approval. Purchase contracts are drawn up by builders and generally are drafted entirely in their favour. Investment buyers, for example, should make changes to allow rental and assignment of purchase rights before title transfer closing.

The Interim Occupancy Closing

Unlike resale home, newly built condominium purchases have two “closings”: (1) the interim occupancy closing and (2) the final closing  date, when title is transferred to the buyer. The builder sets both closing dates in accordance with the construction and registration schedule. The interim occupancy closing date is when the buyer takes possession of the unit. Once the builder obtains occupancy permit from the municipality, the builder will set the interim occupancy closing date, which the buyer cannot delay without consent from the builder. Furthermore, it is often the case that the unit and common elements are not entirely finished when the buyer takes possession of the unit. Both the interim occupancy closing and the final closing will be done through the buyer’s real estate lawyer, who will review the closing documents with the buyer and communicate with the builder’s lawyer to complete the closings. During the interim occupancy period, the buyer must pay a monthly occupancy fee, which is comprised of interest on unpaid or the deferred balance of the purchase price, estimated common elements or maintenance fees, and estimated realty taxes. (Realty taxes need to be readjusted when taxes are assessed by the municipality, but this is often forgotten.) Usually the interim occupancy period lasts several months, but there is no way to know exactly how long it will take until the condominium is registered with the Land Registry Office and the title is transferred to the buyer. The typical builder purchase agreement requires buyers to “title close” in as little as ten days. To allow for vacations and lender work, we recommend at least three weeks to avoid penalty charges from the builder.

The Tarion New Home Warranty

Under the Ontario New Home Warranties Plan Act, all builders of new residential condominiums are required to provide a home warranty to buyers and must be registered with Tarion Warranty Corporation—a private corporation that administers the Act. The Tarion Addendum forms are part of all agreements of purchase and sale for new home purchases. The Tarion Warranty protects the new home buyer’s interest in various ways. It is important for the buyer to review the information provided in the Tarion Addendum, and on the Tarion’s website, to learn more about the buyer’s rights and remedies available. For instance, if the builder has not provided the buyer with sufficient notice to delay the occupancy closing date in accordance with the Tarion’s notice rules, or the builder did not provide possession of the unit to the buyer by the firm occupancy closing date, the buyer may be able to claim a delayed occupancy compensation of up to $7,500.00. Another important role of the Tarion Warranty program is to make sure that the builder finishes all outstanding work, even after the buyer took possession of the unit. It is the buyer’s responsibility to attend the pre-delivery inspection before the interim occupancy closing, and to follow up on the unfinished works listed during the pre-delivery inspection, by submitting the correct forms provided on the Tarion’s website.

The Final Adjustments

On the final closing date, the buyer must be prepared to pay additional costs for various adjustments included in the agreement of purchase and sale. Typical adjustments include, but are not limited to, the realty taxes, the common expenses for the month of final closing, the enrolment fee for the Tarion Warranty, the meter installation and service connection fees for utilities, the development charges or the additional development charges, the electronic registration fee, and the Law Society transaction levy incurred by the builder’s lawyer. Such adjustments can easily cost the buyer thousands or even tens of thousands of dollars more upon final closing. 

The Harmonized Sales Tax (HST) and The HST New Housing Rebate

One of the major differences between purchasing a resale condominium unit and purchasing a new condominium unit is that the buyer must pay HST on the new condominium unit. Many buyers are unaware that the agreed purchase price on the agreement of purchase and sale already includes HST, as well as any applicable HST rebates. The buyer may be eligible to receive a federal and/or an Ontario new housing rebate, if the new unit will be either the buyer’s principal residence or the principal residence of a close relative. If the unit will be an investment property that will be rented out, the buyer must pay or credit the builder, upon final closing, an additional amount equal to the new housing rebate that the buyer could have claimed. Nonetheless, the buyer may still be eligible to receive a rebate for the new residential rental property, which the buyer has to file an application for after the title is transferred to the buyer and a residential lease is in place. The federal rebate reduces the federal part of the HST on a declining scale, depending on the purchase price of the new condominium unit, whereas the Ontario rebate reduces the provincial part of the HST by maximum of $24,000.00.   

Purchasing a newly built condominium can be a frustrating process for buyers who don’t understand between buying a new condominium home and buying a resale condominium home. There are many other things new condominium buyers need to know, but understanding the above five basics of new condominium purchase, at the least, will help the buyers to avoid many surprises and to plan ahead.

If you have any questions about this topic, we can help.