Pre-construction, with eyes open.
Pre-construction condos can be a smart purchase. They can also be expensive lessons. The difference is understanding what you're signing up for before you sign anything.
STEP 1
What pre-construction actually means.
Pre-construction means buying a condo (or sometimes a house) before it's built. You sign an Agreement of Purchase and Sale based on floor plans, renderings, and a sales centre walkthrough. The unit doesn't exist yet. Depending on the project, you might wait 1 to 5 years between signing and getting the keys. Pre-construction is uniquely common in Toronto and the GTA because of the volume of condo development. It works differently from buying resale, with different deposits, different timelines, and different protections.
The 10-day cooling-off period
Ontario has a unique rule for new-build condo purchases. You get 10 calendar days from signing the agreement to change your mind and walk away with a full deposit refund. This is your window to read the disclosure documents (called the Disclosure Statement), have a lawyer review the contract, and confirm everything matches what the sales centre told you. Once 10 days pass, you're committed.
STEP 2
The deposit structure.
Pre-construction deposits don't come in one lump sum. They're structured across several installments over the construction period. A common pattern: 5 percent on signing, 5 percent at 30 days, 5 percent at 90 days, and another 5 percent at occupancy. The total ends up at 20 percent for most projects, meaningfully more than the 5 percent minimum required on resale. Some projects offer longer installment schedules for first-time buyers, which can help with cash flow.
Where your deposit lives
All pre-construction deposits in Ontario must be held in a trust account by the developer's lawyer, with protection from Tarion up to a cap (currently $20,000 for condos under $600,000 and $40,000 for higher price points). If the developer goes bankrupt or cancels the project, you're protected up to those caps. For amounts above, your protection depends on the specific developer's bonding and the project's structure.
Run the mortgage numbers →STEP 3
Occupancy versus closing.
Pre-construction has two key dates: occupancy and closing. Occupancy is when you get the keys and can move in. Closing is when the condo is officially registered and you legally own it. There's often a 6 to 12 month gap between the two (sometimes longer). During this interim occupancy period, you pay occupancy fees to the developer, which function like rent. The fees cover the developer's costs (interest, property tax, common expenses) until the building is fully registered.
Occupancy fees do not build equity
This is the most misunderstood part of pre-construction. The money you pay during interim occupancy doesn't go toward your mortgage. It doesn't build equity. It's a holding fee until closing. For a typical Toronto condo, occupancy fees can run $1,500 to $3,000 per month. Multiply that by 6 to 12 months and you're looking at $10,000 to $30,000 in fees that get you nothing toward ownership. Factor this into your total cost.
STEP 4
Tarion warranty on new builds.
Every new-build condo in Ontario is covered by Tarion's statutory warranty. It's a 1-2-7 structure. Year one covers defects in workmanship and materials. Years one and two cover specific issues (plumbing, electrical, heating, water penetration). Years one through seven cover major structural defects. The developer is responsible for honouring it. If they don't, you can file directly with Tarion. The warranty kicks in at occupancy, not at final closing.
How to use the warranty
Tarion has specific reporting windows. Issues identified during your initial 30-day walkthrough should be listed on the Pre-Delivery Inspection (PDI) form. After that, you file warranty claims through Tarion's online portal. The system is bureaucratic but works if you stay on top of it. Document everything in writing. Take photos. Submit claims promptly. Many warranty issues get resolved if you actually file rather than letting them slide.
Already considering a specific project? A Saint Aubyn Hill agent who works with pre-construction can review the Disclosure Statement, flag risks in the contract, and walk you through the developer's track record.
STEP 5
Assignments: selling before closing.
An assignment is when you sell your pre-construction contract before the condo officially closes. The new buyer takes over your contract and your deposit. Assignments are common in Toronto's pre-con market, especially when buyers' situations change or when market values shift significantly between purchase and completion. Whether you can assign depends on your specific contract. Most developers require their approval and charge an assignment fee, typically $5,000 to $15,000.
Tax implications matter
Assignment proceeds are usually treated as business income for tax purposes if you're flipping (intent to assign from the start), or capital gains if you bought to live in but circumstances changed. The CRA has been actively reviewing pre-construction assignments. HST on assignments became required in 2022 (you pay HST on the profit, not the full sale price). Talk to an accountant who specializes in real estate before agreeing to an assignment.
STEP 6
The real risks.
Pre-construction has risks that resale doesn't. Construction delays are the most common: 1 to 3 year delays are normal in Toronto. Some projects have been delayed 5 or more years or cancelled entirely. Mortgage qualification can change between signing and closing. If interest rates rise or your income drops, you might qualify for less when it's time to close than when you signed. Market values can drop between purchase and closing, leaving you underwater if you need to sell quickly.
Plan for the worst case
Before committing to a pre-construction purchase, run the numbers assuming a 24-month delay, mortgage rates 2 percent higher than today, and a closing where you might need to bring more cash than expected. If you can absorb all three scenarios without stress, the deal might work. If any one of them would put you in financial difficulty, this isn't the right purchase for you. Pre-construction rewards patient, well-capitalized buyers. It punishes everyone else.
STEP 7
Is pre-construction right for you?
Pre-construction works well for investors with 5+ year horizons who can hold through delays, for buyers who genuinely want a brand-new unit and are willing to wait, and for people who can put down a 15 to 20 percent deposit without straining their finances. It doesn't work well for anyone who needs to move within a year, anyone tight on cash, anyone without a backup plan if construction is delayed significantly, or anyone uncomfortable carrying occupancy fees that don't build equity.
When in doubt, buy resale
For most first-time buyers in the GTA, resale is the safer path. You know what you're getting (it exists), you can inspect it, you close on a predictable date, and you start building equity immediately. Pre-construction has its place, but it's not the default. If you're considering pre-con because the deposits seem easier or the unit looks shinier in the rendering, take a step back. The full cost of pre-con (occupancy fees, delay risk, market risk) often makes resale the better deal.
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