Buying Pre-Construction & New Builds

Buying a brand-new home is fundamentally different from buying a resale property. The process is longer, the contracts are more complex, and the financial structure involves costs that do not exist in the resale market — most notably HST/GST, extended deposit schedules, and occupancy fees. But for many first-time buyers, a new build also means modern energy efficiency, a clean warranty, no bidding wars, and the ability to customize finishes before you move in.

This page covers everything you need to know about buying pre-construction and newly built homes in Canada, including where the process can go wrong.

Types of New Construction

Not all new builds are the same. The three main categories each come with different timelines, risks, and levels of customization.

Pre-Construction

You are buying a home that does not exist yet — sometimes years before it will be built. You purchase based on floor plans, renderings, a model suite (if one exists), and the developer’s marketing materials. Pre-construction purchases are most common in the condo market, particularly in Toronto and Vancouver, but also apply to townhouse and detached home developments across the country.

The appeal is straightforward: you lock in today’s price, pay a deposit over time instead of all at once, and potentially benefit from price appreciation between purchase and closing. The risk is equally straightforward: you are committing hundreds of thousands of dollars to a product you cannot see, touch, or walk through — and it may not be ready for years.

Spec Homes (Move-In Ready New Builds)

A spec home (short for “speculative”) is a home the builder has already constructed — or is in the process of building — without a specific buyer lined up. The builder chose the floor plan, lot, and finishes based on what they expect will sell. You can often tour the actual home (or one very similar to it) before buying, and closing can happen within weeks or months rather than years.

Spec homes give you the benefits of new construction — warranty coverage, modern building standards, new mechanical systems — without the long wait or the uncertainty of buying from plans. The trade-off is that you have little or no ability to customize finishes, and the price is typically higher than the same unit would have been at the pre-construction launch.

Custom Builds

You hire a builder to construct a home on a lot you own (or purchase separately). You are involved in every decision — from the foundation and floor plan to the fixtures and landscaping. Custom builds offer maximum control but require the most time, money, and project management.

Custom builds are less common for first-time buyers because of the higher upfront costs and complexity, but they are worth considering in markets where land is available at reasonable prices, particularly in smaller cities, rural areas, and some Prairie markets.

The Pre-Construction Buying Process

The pre-construction buying process is unlike anything you will encounter in the resale market. Here is what to expect.

Sales Centre and Model Suites

Most pre-construction developments operate a sales centre — a dedicated showroom where you can view floor plans, finishes, a scale model of the development, and sometimes a fully built model suite showing what one or two unit layouts will look like when completed. The model suite is typically finished with the builder’s highest-end upgrade package, so keep in mind that the standard finishes included in your purchase price may look different.

VIP and Allocation Events

Developers often release units in phases:

Platinum/VIP access — First offered to the developer’s existing client list and partner real estate agents. This phase often has the best pricing and the widest selection of units.
Agent access — Opened to all registered real estate agents and their clients.
Public launch — Available to anyone.

If you are working with a real estate agent who has relationships with builders, you may get access to VIP pricing and better unit selection. Ask your agent about upcoming developments and whether they can get you on the early access list.

The Purchase Agreement

A pre-construction purchase agreement is a very different document from the standard Agreement of Purchase and Sale (APS) used in resale transactions. Key differences include:

The contract is drafted by the developer’s lawyers, not negotiated between two parties. It is heavily weighted in the developer’s favour.
The agreement is typically 60 to 100+ pages and includes the main agreement, schedules, disclosure statements, and development plans.
You are given a 10-day rescission period (commonly called a “cooling-off period”) in Ontario under the Condominium Act, during which you can cancel the purchase for any reason and receive a full refund of your deposit. Other provinces may have similar protections — check your provincial consumer protection legislation.
The closing date is usually an estimated date, not a firm date. Delays of 6 months to 2+ years are not uncommon.

Deposit Structure

The deposit structure for a pre-construction purchase is very different from a resale transaction. Instead of one lump sum on the offer date, you typically pay 15% to 20% of the purchase price in instalments over several months.

Typical Deposit Schedule

On a $600,000 pre-construction condo, a common deposit structure might look like this:

Payment	Amount	When
Initial deposit on signing	$5,000	Day of signing
First instalment (5%)	$30,000	30 days after signing
Second instalment (5%)	$30,000	90 days after signing
Third instalment (5%)	$30,000	180 days after signing
Fourth instalment (5%)	$30,000	At occupancy
Total deposits	$125,000 (approx. 20.8%)

Some developers accept lower total deposits — as low as 15% — while others may require 20% or more. The schedule varies by development, and some builders offer extended deposit plans (sometimes stretching payments over 18 to 24 months) to attract buyers who need more time to save.

Where Your Deposits Go

Your deposits are held in trust by the developer’s lawyer or a designated trustee. The developer cannot use your deposit money for construction or operating expenses. If the project does not proceed (for example, the developer exercises a sunset clause or goes bankrupt), you are entitled to a refund of your deposits from the trust account.

Tarion Deposit Protection (Ontario)

In Ontario, Tarion Warranty Corporation provides deposit protection for pre-construction purchases. The protection limits are:

Home Price	Maximum Deposit Protection
Up to $600,000	$60,000
$600,001 to $1,500,000	10% of purchase price
Over $1,500,000	$150,000

This means that if you pay deposits exceeding the Tarion protection limits and the builder goes bankrupt, you could lose the amount above the insured threshold. On a $600,000 condo with $120,000 in deposits, Tarion would protect $60,000 — leaving $60,000 at risk. This is a real risk to understand before writing large deposit cheques.

The Occupancy Period

In Ontario and some other provinces, there is often a gap between when you move into your new condo and when you actually take legal ownership. This gap is called the occupancy period, and it is one of the most misunderstood aspects of buying pre-construction.

How It Works

When a new condo building is substantially complete, the developer receives an occupancy permit from the municipality, allowing individual unit owners to move in. However, the condominium corporation cannot be registered until the entire building is finished — including common elements, amenities, landscaping, and final inspections. This registration process can take anywhere from a few months to over a year after you take occupancy.

During the occupancy period, you live in your unit but you do not yet own it. You cannot get a mortgage (because there is no legal title to secure it against). Instead, you pay the developer monthly occupancy fees.

Occupancy Fees (“Phantom Rent”)

Occupancy fees are sometimes called “phantom rent” because you are paying to live in a home you have agreed to buy but do not yet own. These monthly fees typically include:

Estimated mortgage interest — calculated as if you had a mortgage on the unit (usually based on a prescribed rate applied to the balance owing after your deposits)
Estimated property taxes — your share of the building’s municipal property taxes
Estimated common expenses (condo fees) — your share of the building’s operating costs

On a $600,000 unit where you have paid $120,000 in deposits, a typical occupancy fee might be:

Component	Monthly Estimate
Interest on $480,000 (at ~5%)	$2,000
Property tax estimate	$350
Condo fee estimate	$450
Total monthly occupancy fee	$2,800

Why This Matters

The critical thing to understand is that none of this money goes toward your mortgage principal. Every dollar you pay in occupancy fees is gone — it does not build equity, it does not reduce your purchase price, and you cannot claim it back. If the occupancy period lasts 12 months, you could pay $25,000 to $35,000+ in occupancy fees before you even begin making mortgage payments.

Budget for the occupancy period. If you are currently renting, you may be paying both rent and occupancy fees at the same time if there is overlap. Talk to your mortgage broker about how occupancy fees affect your cash flow planning.

HST/GST on New Builds

This is one of the biggest financial differences between buying resale and buying new. Resale homes are exempt from HST/GST. New construction is not.

How HST/GST Applies

When you buy a newly built home, the purchase price includes HST (in Ontario, the Maritimes, and Newfoundland) or GST (in Alberta, BC, Saskatchewan, Manitoba, and Quebec — plus applicable provincial sales tax). The total tax can be substantial:

Province	Tax on New Homes	Rate
Ontario	HST	13%
British Columbia	GST + provincial transition tax	5% + 2% on some homes
Alberta	GST only	5%
Saskatchewan	GST only (PST rebate may apply)	5%
Manitoba	GST only	5%
Quebec	GST + QST	5% + 9.975%
New Brunswick	HST	15%
Nova Scotia	HST	15%
Newfoundland & Labrador	HST	15%
PEI	HST	15%

On a $500,000 new-build condo in Ontario, the HST would be $65,000 before any rebates. In practice, builders typically include the HST in the listed purchase price and assign the rebates back to themselves — so the sticker price already accounts for the net tax cost. But it is essential to confirm this with the developer. If the price does not include HST, your actual cost is dramatically higher than the listed price.

Federal GST New Housing Rebate

The federal government offers a rebate of 36% of the GST portion on new homes with a pre-tax price of $350,000 or less, worth up to $6,300. The rebate is gradually phased out on homes priced between $350,000 and $450,000. Above $450,000 (pre-tax), there is no federal rebate.

2025 Federal Proposal: GST Elimination on New Homes

The federal government proposed eliminating GST entirely on new homes priced under $1,000,000. If enacted, this would save buyers up to approximately $50,000 on new construction. As of early 2026, check the current status of this proposal — it may have been passed into law, modified, or not yet implemented. Your lawyer or builder will be able to confirm whether the exemption is in effect for your purchase.

Provincial Rebates

Several provinces offer their own rebates on top of the federal rebate. For province-specific details, see our guides to Ontario government programs and British Columbia government programs:

Province	Provincial Rebate	Maximum
Ontario	75% of provincial HST (8%)	$24,000
Quebec	50% of QST on homes up to ~$277,500 pre-tax	$9,975
Nova Scotia	HST rebate on new builds	~$3,000
New Brunswick	HST rebate on new builds	~$3,000

In Ontario, the combined federal + provincial rebate on a qualifying new home can be up to $30,300 — a significant amount. Builders almost always assign these rebates back to themselves and incorporate them into the purchase price, so make sure you understand whether the price you are quoted is “net of rebate” or “before rebate.”

Assignment Sales and HST

If you are buying an assignment (purchasing someone else’s pre-construction contract before closing), the HST implications are more complex. The original purchaser may owe HST on any profit from the assignment, and the builder may also charge HST on the remaining balance. Discuss the full tax picture with your lawyer and accountant before entering into an assignment purchase. More on this below.

Provincial New Home Warranty Programs

Every province in Canada requires new homes to be covered by a warranty program. These warranties protect you against defects in workmanship, materials, and structural integrity — but they have important limits and exclusions.

Ontario: Tarion Warranty Corporation

Tarion is the mandatory warranty provider for all new homes built in Ontario. Every new home comes with three levels of coverage:

Coverage	Duration	What It Covers
Workmanship and materials	1 year	Defects in work and materials (e.g., cracked tiles, leaky faucets, improperly installed flooring, drafty windows)
Distribution systems	2 years	Defects in plumbing, heating, electrical, and delivery systems; water penetration through the building envelope; violations of the Ontario Building Code affecting health and safety
Major structural defects	7 years	Defects in load-bearing elements that materially affect structural integrity or that prevent the home from being used for its intended purpose

What Tarion does NOT cover:

Normal wear and tear or shrinkage (some drywall cracking and nail pops in the first year are considered normal settling)
Damage caused by the homeowner (improper maintenance, renovations, alterations)
Landscaping, grading, and sodding beyond certain standards
Items you agreed to accept “as is” at the pre-delivery inspection
Secondary damage from a defect you failed to report in a timely manner

How to make a claim: Submit your claim through Tarion’s online portal within the applicable warranty period. You must first give the builder a chance to fix the issue (with a reasonable timeline). If the builder does not resolve it, Tarion steps in to assess and potentially resolve the claim. Document everything with photos and written correspondence.

British Columbia: 2-5-10 Home Warranty

BC requires all new homes to carry warranty coverage through a licensed home warranty provider. The standard coverage is:

Coverage	Duration
Materials and labour	2 years
Building envelope (water penetration)	5 years
Structural defects	10 years

BC’s building envelope coverage is particularly important given the province’s rainy climate. The “leaky condo crisis” of the 1990s and 2000s — which affected thousands of condo units in the Lower Mainland — led to stricter building codes and enhanced warranty requirements.

Alberta: Alberta New Home Warranty Program

Alberta requires new home builders to provide warranty coverage. The standard coverage includes:

Coverage	Duration
Materials and labour	1 year
Delivery and distribution systems	2 years
Building envelope	5 years
Structural defects	10 years

Atlantic Canada

New Brunswick, Nova Scotia, PEI, and Newfoundland each have their own new home warranty requirements, though the specifics vary. Coverage generally follows a similar structure:

1 year for workmanship and materials
2 years for delivery systems (plumbing, electrical, heating)
5 to 7 years for building envelope
7 to 10 years for major structural defects

The Atlantic Home Warranty Program covers homes in New Brunswick and Newfoundland. Nova Scotia has the Atlantic Home Warranty Program and the Nova Scotia New Home Warranty Program. PEI requires warranty coverage under provincial legislation.

Quebec: Garantie de Construction Residentialle (GCR)

Quebec’s mandatory warranty plan covers:

1 year for workmanship defects
3 years for hidden defects and faulty design, construction, or soil preparation
5 years for major structural defects (vices majeurs)

Assignment Sales

An assignment sale occurs when the original purchaser of a pre-construction unit sells their purchase contract to a new buyer before the building is completed and the deal closes. You are not buying the property — you are buying the right to complete the purchase on the original buyer’s terms.

How Assignment Sales Work

The original buyer (the “assignor”) entered into a purchase agreement with the developer at an earlier stage — often at a lower price.
Before closing, the assignor finds a new buyer (the “assignee”) willing to take over the contract.
The assignee pays the assignor for the right to step into the contract. This payment typically covers the assignor’s deposits plus a profit premium.
On closing day, the assignee completes the purchase directly with the developer, as if they were the original buyer.

Most purchase agreements require the developer’s written consent before an assignment can take place. The developer may charge an assignment fee — typically $3,000 to $10,000+ — and may impose conditions on the assignment. Some developers prohibit assignments entirely, or restrict them until a certain percentage of units are sold. Always check the assignment clause in the original purchase agreement before assuming you can assign.

HST on Assignment Sales

Assignment sales have complex HST implications:

If the assignor is not registered for HST purposes and bought the unit as a primary residence, the assignment profit may still be subject to HST if the CRA considers it a commercial activity.
If the assignor is considered to have purchased the unit for the purpose of reselling it (which is common with pre-construction investors), HST applies to the full assignment price — not just the profit.
The assignee may also be responsible for HST on the remaining purchase price at closing.

Profit Taxation

Any profit the assignor makes on the assignment is taxable income. If the CRA determines the assignment was a business activity (buying with the intention to flip), the profit is taxed as business income (at your full marginal rate), not as a capital gain. This distinction matters significantly — business income is taxed at roughly double the effective rate of capital gains.

Risks for Assignees

You inherit the original contract terms, including any clauses that may not be favourable
You rely on the assignor’s representations about the unit and the developer
If the assignor has not disclosed material changes to the project, you may not discover them until after you have committed
Financing can be more complex — some lenders are less comfortable with assignment purchases

Builder Upgrades and Negotiations

When you buy a pre-construction home, the builder will offer you a menu of upgrades — from quartz countertops and hardwood flooring to upgraded appliances, additional electrical outlets, and built-in closet organizers. These upgrades can add $10,000 to $100,000+ to the purchase price, depending on the scope.

Standard vs. Upgrade Finishes

The “standard” finishes included in your purchase price are the builder’s basic package. They are livable but typically on the lower end of quality. Common standard finishes include laminate countertops, basic tile, builder-grade carpet, and standard appliances. The upgrade packages offer better materials and finishes at the builder’s markup.

What Is Worth Upgrading

Not all upgrades are created equal. Some changes are difficult or impossible to make after the home is built, while others are easy to do yourself for a fraction of the builder’s price.

Worth upgrading through the builder (hard or impossible to change later):

Additional electrical outlets and rough-ins — Adding outlets, Ethernet runs, or rough-ins for future fixtures after the walls are closed costs significantly more than having the builder include them during construction
Plumbing rough-ins — A rough-in for a future bathroom in the basement, or an additional water line for a future dishwasher or laundry setup
Upgraded electrical panel — Going from 100-amp to 200-amp service is far cheaper during construction
Structural changes — Removing or relocating walls, adding windows, raising ceilings (if available as an option)
Exterior upgrades — Stone or brick facades, larger windows, upgraded insulation

Often not worth upgrading through the builder (cheaper to do yourself):

Backsplash and tile — Builder prices for tile are typically 2 to 3 times what a contractor would charge after closing
Light fixtures — Builder upgrade light fixtures are often mediocre quality at premium prices
Closet organizers — Companies like IKEA or California Closets offer better products for less
Hardwood flooring — This is a grey area. Builder installation during construction is convenient, but you can often get better quality flooring installed independently for a similar or lower price
Appliances — Builders mark up appliances significantly. You can buy your own during a holiday sale for far less

Negotiation Leverage

Builders are most willing to negotiate when they need to move inventory. Look for leverage in these situations:

End of quarter or fiscal year — Builders need to report sales numbers. They may offer credits, free upgrades, or reduced deposits to close deals before reporting deadlines.
Slow market conditions — When the overall market cools, builders may offer incentives ranging from $10,000 to $50,000+ in upgrades, reduced deposits, or capped development charges.
Final units in a phase — Builders want to sell out phases to move to the next one. The last few units in a building or phase often come with the best deals.
Extended occupancy — If the builder has unsold inventory sitting in an occupied building, they are paying carrying costs and are motivated to deal.

Risks and Red Flags

Pre-construction purchases carry risks that do not exist in the resale market. Understanding these risks before you buy helps you make an informed decision and prepare for the worst-case scenarios.

Construction Delays

Delays are not the exception in pre-construction — they are closer to the norm. A development that was supposed to be ready in 2 years might take 3 or 4. Delays of 1 to 2 years beyond the original estimated occupancy date are not unusual, and some projects have been delayed by 3+ years. Causes include permitting delays, labour shortages, supply chain disruptions, weather, and financing issues.

Delays affect you in practical ways:

You may need to extend your lease or find temporary housing
Your mortgage pre-approval may expire (pre-approvals are typically valid for 90 to 120 days, with rate holds of up to 120 days)
Interest rates may have changed significantly since you signed
Your personal circumstances may have changed (job, family, income)

Builder Bankruptcy

If a builder goes bankrupt before completing the project, your deposits are at risk above and beyond the warranty protection limits. In Ontario, Tarion protects deposits up to $60,000 on homes priced at $600,000 or less. In other provinces, check the applicable deposit protection rules. If you have paid $100,000 in deposits on a $500,000 unit and the builder goes under, you could potentially lose $40,000 or more.

The Finished Product May Not Match Marketing Materials

The renderings, model suites, and marketing brochures you saw at the sales centre are aspirational — they represent the developer’s vision, not a contractual guarantee. The actual unit may differ in:

Quality of finishes
View (neighbouring developments may be built between purchase and closing)
Layout details (minor floor plan changes are common)
Common elements and amenities (may be scaled back or modified)

Your purchase agreement will typically include clauses allowing the developer to make “reasonable changes” without your consent. Review these clauses carefully with your lawyer.

Market Changes

If property values decline between your purchase date and closing date — which could be 3 to 5 years away — you still close at the original contract price. You cannot renegotiate or walk away without forfeiting your deposits (and potentially facing legal action). This means you could close on a unit that is worth less than what you agreed to pay, and your lender may not approve a mortgage for the full amount if the appraised value comes in below the purchase price. You would need to make up the difference in cash.

Conversely, if the market rises, you benefit — your unit is worth more than you paid, and you have built-in equity on closing day.

Unregistered Condo Delays

For condo purchases, the building must be registered as a condominium corporation before final closing can occur. If the developer experiences delays in registration, your occupancy period (and phantom rent) extends. There have been cases in Ontario where occupancy periods lasted 18 to 24+ months before registration.

Key Contract Terms to Review with Your Lawyer

Before signing a pre-construction purchase agreement, have your real estate lawyer review these critical terms:

Outside Closing Date

The outside closing date is the latest date by which the developer must close the transaction. If the developer cannot close by this date, you may have the right to terminate the agreement and receive a full refund of your deposits. Make sure your agreement has a clearly defined outside closing date that is reasonable.

Sunset Clause

A sunset clause allows the developer to cancel the purchase agreement if certain conditions are not met by a specified date (for example, if the developer cannot secure financing, obtain permits, or sell enough units to proceed). Historically, some developers have used one-sided sunset clauses to cancel contracts when property values have risen — allowing them to resell units at higher prices.

Ontario introduced legislation to restrict the abuse of sunset clauses, requiring developers to provide reasons for invoking them and giving buyers the right to challenge unfair cancellations through Tarion. Check the sunset clause in your agreement carefully and make sure it is mutual — meaning both you and the developer can invoke it under defined circumstances.

Cap on Development Charges

Municipalities charge developers development charge levies to fund infrastructure (roads, sewers, transit, parks). Developers pass these charges on to buyers. If your agreement does not cap the development charges, the developer can charge you whatever the municipality levies at the time of closing — which could be significantly more than expected if the municipality raises its rates during the construction period.

A development charge increase of $5,000 to $15,000 between signing and closing is not unusual. Ask your lawyer to negotiate a cap or a fixed amount.

Right to Lease Before Closing

Some purchase agreements restrict your ability to lease the unit during the occupancy period or after closing. If you might need to rent the unit out (for example, if your circumstances change), make sure the agreement permits leasing.

Assignment Clause

As discussed above, check whether the agreement allows assignments, what the developer charges for an assignment, and what conditions must be met. If the assignment clause is too restrictive, you may be locked into the purchase with no ability to exit before closing.

Parking and Locker Allocation

Parking spots and storage lockers in new condo developments are often sold separately and may not be guaranteed in your agreement. Confirm whether your purchase includes parking and/or a locker, what the cost is, and whether you will receive the specific spot or locker shown in the sales materials. Parking spots in downtown Toronto condos can cost $50,000 to $100,000+, so this is not a minor detail.

Pre-Delivery Inspection (PDI)

Before you take occupancy of your new home, you will conduct a pre-delivery inspection with the builder. This is your opportunity to walk through the completed unit and document every defect, missing item, and unfinished element.

What to Look For

Scratches, chips, and dents on countertops, flooring, cabinets, appliances, fixtures, and walls
Paint quality — drips, uneven coverage, wrong colours
Doors and windows — proper operation, locks, seals, weatherstripping
Plumbing — run every tap, flush every toilet, check for leaks under sinks
Electrical — test every outlet, switch, and light fixture
HVAC — test heating and cooling
Flooring — check for loose tiles, squeaky floors, uneven surfaces, grout issues
Trim and mouldings — gaps, uneven joints, missing caulking

Everything you identify during the PDI is recorded on a deficiency list (the “PDI form”). The builder is obligated to fix these items within a reasonable timeframe after occupancy. Items you do not document during the PDI are harder to claim under warranty later.

Tips for the PDI

Bring a flashlight, blue painter’s tape (to mark defects), a phone camera, and a notepad
Take your time — a thorough PDI for a condo unit takes 1 to 2 hours; for a house, 2 to 4 hours
Consider hiring a professional inspector to conduct the PDI with you ($300 to $500) — they will catch things you might miss
Do not let the builder rush you or tell you an item is “normal” without documenting it

Summary: New Construction Checklist

Before committing to a pre-construction or new build purchase, make sure you have:

Buying a pre-construction home can be an excellent path to homeownership — but it requires more patience, more due diligence, and a higher tolerance for uncertainty than buying resale. Go in with your eyes open, get proper legal advice, and budget conservatively for the timeline and costs ahead.

Next: The Purchase Agreement

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