Pre-Construction and New Buildings

Real Estate Law · Pre-construction & New Builds

Pre-construction & New Builds

Last updated: July 2026

Pre-construction and new-build purchases involve buying a home directly from a builder before or shortly after completion — with a lawyer reviewing the builder's agreement within the cooling-off period, calculating adjustments and taxes, managing occupancy and final closing, and asserting your rights when delays or defaults occur. Whether you're in Toronto, Markham, Richmond Hill or elsewhere in Ontario, these legal rules apply province-wide.

Who This Is For

Pre-construction condo buyers Buyers of freehold new homes (detached, townhomes) Buyers within the 10-day cooling-off period needing contract review Condo buyers facing interim occupancy & final closing Buyers facing builder delays, changes, price increases, or cancellations Assignors & assignees of pre-construction contracts Owners with post-closing defects needing Tarion warranty claims Owners building custom homes on their own land

Key Legal Points

Pre-construction condos have a 10-day cooling-off period; freehold new homes currently do not

Under s.73 of Ontario's Condominium Act, buyers of new condominiums have 10 calendar days (including weekends — not business days) to rescind without any reason, starting from the later of receiving the signed agreement and the Disclosure Statement with the condo guide. Freehold new homes currently have no such right — the Homeowner Protection Act, 2024 has legislated an equivalent 10-day cooling-off period, but it is not yet in force and is expected to take effect January 1, 2027. Until then, when you sign for a new freehold home, you're bound — see a lawyer before signing, not after.

📎 Condominium Act, 1998, s.73 (Ontario e-Laws)

The cooling-off period is your only clean exit

These 10 days are absolute and no-reason-required — not a "think it over" suggestion. After they expire, the only potential second chance is if the builder makes a Material Change to the Disclosure Statement, which may trigger a new 10-day window — but whether a change qualifies as "material" is frequently disputed, and if the builder disagrees, the question goes to court.

Tarion warranty has three tiers — not just "it's under warranty"

New home warranty coverage comes in three layers, each with its own claim windows and forms — miss the deadline, lose the right. This is the most common and most avoidable loss we see:

1 year — defects in materials and workmanship, unauthorized substitutions, Ontario Building Code violations
2 years — water penetration, electrical/plumbing/heating system defects, major exterior cladding issues
7 years — major structural defects (MSD)

📎 Tarion — Official New Home Warranty Site

Deposit protection has limits — and freehold buyers face a new registration step from April 2026

Condo deposits are held in trust by the builder's lawyer under s.81 of the Condominium Act, with Tarion backstop protection capped at $20,000 per unit (including upgrades). Freehold deposit protection is: up to $60,000 for homes priced $600,000 or less, and 10% of the price up to $100,000 for homes above $600,000. New rule: for freehold agreements signed on or after April 1, 2026, buyers must register with Tarion within 45 days of signing — late registrants' deposit protection shifts to a capped special fund (this change has a transition period, delayed to January 1, 2027).

Delayed closing compensation exists — but it's capped at $7,500 with a 180-day claim deadline

When a builder misses the Firm Date in the Tarion Addendum without a permitted excuse, compensation is: $150/day for direct living expenses (no receipts required) plus other costs like moving and storage (receipts required), capped at $7,500 total. If the builder failed to give the required 10 days' notice of delay, there's an additional fixed $1,500. Claims must be made to the builder within 180 days of closing; if the builder won't pay, you can claim to Tarion within the first year of possession.

Note: Tarion coverage amounts, deadlines, and the 2026–2027 rule changes are subject to current publications by Tarion and the Government of Ontario.

Legal Risks in Builder Agreements

The builder's agreement was written by the builder's lawyers — it serves the builder from the very first word. Here's what we review, clause by clause.

Adjustments with no cap

Development charges, education levies, park fees, utility connection charges, Tarion enrolment fees, Law Society levies — all added at closing. If the agreement doesn't contain a cap, these figures can be multiples of what they were at signing. This is the most common one-time financial shock for pre-construction buyers, often running well into five figures.

The builder's unilateral extension rights and the "Firm Date" game

Agreements typically contain a chain of dates: Tentative → Firm → Outside Date. The builder can extend multiple times under prescribed conditions, and Tarion compensation only runs from the Firm Date. If you can't read this date table, you don't know when you're entitled to money — or when you're entitled to walk away.

Two HST traps

(1) The sticker price usually assumes you'll assign the HST rebate to the builder — which requires that you or an immediate family member live in the home. If you're buying to rent out or won't occupy, the builder claws back that rebate at closing (commonly $20,000+), and you must separately apply for the rental rebate (NRRP). (2) Since May 7, 2022, GST/HST applies to the profit on all new-home assignment sales.

Assignment is a privilege the builder grants — not your right

Most agreements restrict or prohibit assignment; even when permitted, builders typically charge substantial assignment fees and retain consent rights. Some also prohibit public listing before the project sells out. If your plan is "flip it before completion," read the assignment clause before you buy.

The appraisal gap

Your bank lends based on the appraised value at closing — not the price you agreed to years earlier. When the market pulls back and the appraisal comes in below the contract price, you cover the difference in cash. If you can't, you're in default.

Project cancellations and "material changes"

Shrinking floor plans, changed orientation, adjusted square footage, cancelled amenities — agreements often give the builder wide latitude. If a project is cancelled, you typically get your deposit back with interest — but nobody compensates you for years of lost opportunity.

Interim occupancy: paying the builder's carrying costs

During the occupancy period before condo registration, your monthly "occupancy fee" = interest on the unpaid balance + estimated property tax + common expenses. None of it builds equity — not one dollar goes to principal. Occupancy periods lasting one to two years are not uncommon.

Your Rights on Delayed Closing

One thing must be said plainly: the $7,500 cap often falls far short of the extra rent, interest, and market losses a delay actually causes. This isn't a question of "how much can we win in court" — the system is designed with a ceiling. Which is why the real work happens in the 10 days after signing, not after the delay.

The Tarion Warranty Claim Process & Deadlines

Pre-Delivery Inspection (PDI) on closing dayEvery visible issue goes on the form, on the spot — if it's not written down, it doesn't exist

30-Day FormSubmit your first warranty claim within 30 days of possession

Year-End FormSubmit within the last 30 days of your first year

2-Year Form / Major Structural Defect FormEach submitted before its respective deadline expires

Tarion ConciliationWhen the builder won't repair — or repairs fail

Appeal to the Licence Appeal Tribunal (LAT)If you disagree with Tarion's decision

Miss the deadline, lose the right. Tarion warranty is not "report it whenever you find it" — it's a strict deadline-driven claim system. We've seen too many compensable defects lose all remedy simply because the 30-day or year-end window closed.

How H. Law Firm Approaches These Matters

H. LAW FIRM 恒. 律师事务所

Led by Miao (Mia) He, LSO #83315K · Bilingual English & Mandarin

We review contracts within the 10 days — not right before closing. Pre-construction outcomes are decided in the 10 days after signing. If you come to us just before closing, all we can do is calculate your losses — and that's not the role we want to play.

We calculate adjustments and HST for you upfront. Before you sign, we turn "how much more will I need at closing" into a single number — instead of letting the builder's statement of adjustments deliver the shock on closing day.

We plan ahead — no last-minute scrambles. On the day we're retained, we issue clients a written instruction letter listing every step: what to do, who does it, and by when — including every Tarion claim deadline, with reminders sent in advance.

Full Mandarin communication. The builder agreement's date tables, adjustments, HST clauses, and assignment restrictions are explained item by item in Chinese — no client signs a document they don't understand.

Transparent fees, no hidden charges. We explain the complete fee structure at the outset of the retainer and provide itemized disbursement lists with receipts.

Cooling-off period contract review Adjustments & HST calculation Pre-construction closings Assignment transactions Delayed closing claims Tarion claims & deadline management Builder default response Custom home builds

Frequently Asked Questions

What can I do if the builder defaults?

First identify which kind of "default" it is — four scenarios, four completely different remedy paths:

Delayed closing — Tarion delayed closing compensation: $150/day living expenses (no receipts) plus other costs (receipts required), capped at $7,500; plus a fixed $1,500 if the builder didn't give the required 10 days' notice. Claim to the builder within 180 days of closing/termination; if the builder won't pay, claim to Tarion within the first year of possession. If the Outside Date has passed, you generally have the right to terminate and recover all funds with interest.
Project cancellation — Deposit plus interest is refundable by law, with Tarion deposit protection as backstop if the builder is insolvent ($20,000/unit for condos; $60,000 or 10% up to $100,000 for freehold). But what you recover is money — not the home, and not the years of lost opportunity. You can also complain to the HCRA, and cancellations appear on the public Ontario Builder Directory. Whether additional damages are available depends on the contract terms and the reason for cancellation.
Quality defects — The Tarion warranty route: PDI → 30-Day Form → Year-End Form → 2-Year Form → Major Structural Defect Form; if the builder won't repair, request Tarion Conciliation, and appeal to the LAT if you disagree. The key is deadlines, not arguments — miss the window, lose the right.
Refusal to close, unilateral changes, demands for more money — The most serious category. Contract damages may be claimed; specific performance may be available where the conditions are met; and a Certificate of Pending Litigation (CPL, with court leave) may be considered where there's a claim to an interest in land. But builder agreements usually contain remedy-limiting clauses — whether and how far they can be overcome requires clause-by-clause review.

Our approach: a contract check-up first — the date table, exclusion clauses, remedy-limitation clauses, and whether any deadlines have passed — then we lay out the cost and recovery of each path before deciding whether and how to fight.

📎 HCRA — Home Construction Regulatory Authority

How exactly is the condo 10-day cooling-off period counted? Is there any recourse if I miss it?

Under s.73 of the Condominium Act: 10 calendar days (weekends included), starting from the later of receiving the signed agreement and the Disclosure Statement plus condo guide. Sign on a Friday night and the weekend counts. Rescission must be delivered to the builder in writing within the period. After it expires, the only potential second chance is a material change to the Disclosure Statement — which may trigger a fresh 10-day window, but neither you nor the builder gets to unilaterally decide what's "material"; disputes go to court. Bottom line: these 10 days are your only free exit — spend them getting a lawyer, not waiting.

I'm buying a new freehold home — do I get a 10-day cooling-off period too?

Not currently. The 10-day cooling-off period is a Condominium Act right for new condo buyers. Ontario has passed the Homeowner Protection Act, 2024, which will extend the same 10-day rescission right to new freehold homes (amending s.53 of the New Home Construction Licensing Act), but the provision is not yet in force — expected January 1, 2027. Until then, signing for a new freehold home binds you immediately, with no no-reason exit window. Have a lawyer review the agreement before you sign, not after.

Why do I have to pay so much extra at closing?

Adjustments. Development charges, education levies, park fees, utility connections, Tarion enrolment, Law Society levies — all added in one lump at closing. Without a negotiated cap in the agreement, these can far exceed expectations. Two more common shocks: (1) HST rebate clawback — if you won't occupy the home (renting it out or reselling), the builder recovers the rebate assumed in the sticker price (commonly $20,000+), and you must apply for the rental rebate yourself; (2) the appraisal gap — the bank lends on the closing-date appraisal, and if it's below your contract price, you cover the difference in cash. Those three together answer the question: "I negotiated the price — why am I paying tens of thousands more?"

Can I sell (assign) my pre-construction unit before closing?

It depends on the contract. Assignment is not an inherent buyer's right: most builder agreements restrict or prohibit it, and even where allowed, builders typically charge substantial fees and retain consent rights — some prohibit public listing until the project sells out. There's also a tax layer: since May 7, 2022, GST/HST applies to the profit on all new-home assignments, and assignment profits may be taxed as business income rather than capital gains — a significant difference. Read the assignment clause before you buy, not when you're trying to sell.

If I find problems at closing, can I refuse to close?

Usually not. Builder agreements almost universally provide that defects are not grounds to refuse closing — they're to be resolved through the Tarion warranty. That's why the PDI form on closing day is so critical: every visible issue must be written down; documented issues have standing, undocumented ones effectively concede there was no problem. Then claim strictly within the 30-day, year-end, 2-year, and major structural windows. If problems are severe enough to prevent occupancy (e.g., no Occupancy Permit), that's a different situation requiring case-by-case analysis.

Real Cases (Anonymized)

Case 1 · Adjustments with no cap

The client brought us the agreement within the 10-day cooling-off period. The development charges, education levies, and utility connection fees had no cap clauses — projected over the construction timeline, the actual closing amounts could far exceed the client's expectations. We consolidated all adjustments and HST rebate risk into a single number, and the client used it to renegotiate cap clauses with the builder within the cooling-off period — which is the entire point of those 10 days.

Case 2 · Missed year-end warranty deadline

The owner discovered progressive water penetration and workmanship issues after moving in, and spent nearly a year communicating verbally with the builder — without ever filing Tarion's Year-End Form. When the first year expired, items that would have been compensable lost all remedy because the claim window had closed. We then built the client a warranty deadline tracker, putting every claim window on the calendar.

Areas We Serve

We provide pre-construction and new-build legal services to clients throughout Ontario, including:

Toronto Markham Richmond Hill North York Vaughan Mississauga Scarborough All Ontario

Inside your 10-day cooling-off period? Contact us now

English & Mandarin · Toronto & Markham & All Ontario

This page provides general legal information only. It does not constitute legal advice and does not create a lawyer–client relationship. Please contact our firm regarding your specific situation. Tarion coverage amounts, deadlines, and the 2026–2027 rule changes are subject to current publications by Tarion and the Government of Ontario.