Buying a pre-construction condo in London
Key takeaways
- New condos from a developer come with a 10-day cooling-off period. Use it to have a lawyer review the agreement.
- Expect a deposit schedule spread over months, and an "interim occupancy" period before you officially own the unit.
- Condo deposits must be held in trust, and Tarion provides limited protection (up to $20,000 per Tarion) if a builder fails to return a deposit.
- Closing costs on new condos can include items resale buyers never see. Ask for them in writing.
London has seen steady condo construction in recent years, from downtown towers to mid-rise buildings in the north and southwest. Buying from a developer, before or during construction, is a very different process from buying a resale unit. It's not riskier or safer by default, but the risks are different.
The 10-day cooling-off period
Under Ontario's Condominium Act, 1998, a buyer of a new condo unit from a developer can rescind the agreement within 10 days of receiving the signed agreement and the developer's disclosure statement (whichever comes later), and get their deposit back. This is your window to:
- Have a real estate lawyer review the agreement and disclosure statement.
- Confirm your financing with a lender, including how they treat the deposit schedule and the future closing.
- Read the proposed declaration, budget and any restrictions (rentals, pets, assignments).
Developers' agreements are long and written to protect the developer. Clauses on price adjustments, closing costs, occupancy delays and assignment rights are where most surprises live.
Deposits and how they're protected
Pre-construction condos usually require deposits in stages, for example a set amount at signing, then further payments over the following months. In Ontario:
- Under the Condominium Act, deposits must be held in trust, and if the builder terminates the agreement they must be returned in full within 10 days (per Tarion).
- Tarion, the province's new-home warranty administrator, provides protection of up to $20,000 if the builder doesn't return the deposit. Amounts above that depend on how the developer holds or secures the funds, so ask your lawyer.
Check the current limits and rules on Tarion's deposit protection page, and ask the developer and your lawyer exactly how your deposits are protected.
Interim occupancy: the step that surprises people
With a new condo, you often move in before you legally own the unit. That's because the whole building has to be registered as a condominium before individual units can be transferred. Between moving in and final closing, you're in "interim occupancy", and you pay an occupancy fee to the developer. It's generally made up of:
- Interest on the unpaid balance of the purchase price
- An estimate of the unit's monthly common expenses
- An estimate of the unit's property taxes
Occupancy fees don't build equity. Interim occupancy can last a few months or longer, depending on how quickly the building is registered. Budget for it.
Delays
Construction delays are common. Your agreement and Tarion's Addendum set out how the developer can extend occupancy dates, how much notice they must give, and when you may be entitled to delay compensation. Your lawyer can explain the specifics.
Closing costs on new condos
On top of land transfer tax and legal fees, new-condo closings can include:
- Development charges and levies, if the agreement passes some or all of them to the buyer. Some agreements cap them; some don't.
- Utility meter and connection fees
- Tarion enrolment fee, often passed through to the buyer
- HST adjustments. New homes are subject to HST, and rebates may apply. Federal and Ontario rebates for new homes have changed significantly. See our sister site New Build London for current details.
- Reserve fund contribution at closing (often equal to a couple of months of fees)
Ask for a schedule of closing adjustments before you sign, and have your lawyer check whether any are capped. Uncapped development charges have cost some Ontario buyers thousands at closing.
Tarion warranty on new condos
New condo units and common elements come with statutory warranty coverage administered by Tarion, while builders are licensed separately by the Home Construction Regulatory Authority (HCRA). You can check a builder's licence in the HCRA's Ontario Builder Directory. The warranty includes coverage on workmanship and materials, plumbing, electrical and building envelope items, and major structural defects, each for different periods. You'll do a pre-delivery inspection (PDI) with the builder before moving in. Document every issue carefully, and keep track of the deadlines for submitting warranty forms. See Tarion's website for current coverage details.
Assignments
An assignment means selling your purchase contract to someone else before closing. Many developers restrict or charge for assignments, and there can be tax implications. If you might need flexibility, read the assignment clause carefully.
New vs resale: which is right for you?
- New gives you modern layouts, warranty coverage, a chance to choose finishes, and no previous wear. But you face delays, interim occupancy and less certainty about the final product and fees.
- Resale means you can see exactly what you're buying, check fee history and the reserve fund, and move in on a known date. But it may need updating, and older buildings may face upcoming major repairs.