Buying a pre-construction townhouse in Ontario

Know whether it is freehold or condo

The rules depend on which one you are buying. When you buy a new condo townhouse from a builder in Ontario, you have a 10-day cooling-off period. It starts when you receive the signed agreement and the disclosure statement. A new freehold townhouse does not come with that cooling-off period, so have a lawyer who knows pre-construction review the agreement before you sign, and line up your mortgage pre-approval.

Deposits are paid in stages

Instead of one deposit, you usually pay several over the first year or two. Deposits on new condo townhouses must be held in trust, and Tarion's deposit protection covers deposits on new freehold and condo townhouses up to a set limit.

Occupancy can come before closing

A freehold townhouse closes once, on the closing date, and you own it from that day. A condo townhouse is often ready before the condominium is registered. During that gap, called interim occupancy, you can move in but you do not own the home yet. You pay the builder a monthly occupancy fee, which is not a mortgage payment and does not reduce what you owe.

Budget for closing costs

On top of land transfer tax and legal fees, new townhouses come with adjustments such as development charges, utility connection fees and Tarion enrolment. Ask for these to be capped in your agreement, and ask your lawyer what a realistic total looks like. How HST and any rebate apply depends on whether you will live in the home or rent it out, so confirm that with your lawyer or accountant early.

Dates move

Closing and occupancy dates in the agreement are tentative and builders are allowed to extend them within set limits. Plan your current housing with that in mind.

Know your assignment rights

If your plans change before closing, you may be able to sell your agreement to another buyer. Whether you can, and what the builder charges, is set by the assignment clause, so negotiate it at the start. See how assignment sales work.