Updated: April 2025  |  bremo.io financial guides

Buying New Construction in Canada: Risks, Process, and What to Know

New construction purchases are fundamentally different from resale transactions. You are buying something that does not yet exist, signing a contract heavily weighted toward the builder, and committing your money years before you take possession. Many buyers find the experience rewarding — but those who go in unprepared often face costly surprises.

Types of New Construction in Canada

New construction purchases fall into two broad categories:

• Pre-construction: You buy before or during construction, typically 12 to 48 months before occupancy. Price is locked in at signing.
• Builder-spec or move-in ready: The home is complete or nearly complete. You see the finished product and can typically close within weeks.

The Deposit Structure

New construction deposits are paid in installments over time, not all at once. A typical condo pre-construction deposit schedule might look like:

• 5% on signing
• 5% in 30–60 days
• 5% in 90–120 days
• 5% at a later date or on occupancy

Total deposits often equal 15% to 25% of the purchase price. Builder deposit protection varies by province — Ontario's HCRA (Home Construction Regulatory Authority) provides deposit protection through Tarion up to $100,000 for freehold and $20,000 for condos (or the full deposit for registered new homes).

The Cooling-Off Period

In Ontario, condo buyers have a 10-day rescission period after signing a pre-construction purchase agreement. You can cancel without penalty and receive your deposit back within this window. After 10 days, you are bound. Use this time to have a lawyer review the agreement.

BC has similar protections for strata (condo) buyers. Freehold new construction purchases do not always have cooling-off periods — confirm with your lawyer.

HST on New Construction

New homes in Ontario and BC are subject to HST or GST on the purchase price. The federal/provincial New Housing Rebate partially offsets this:

• Ontario: HST is 13%. The rebate reduces this for homes under certain price thresholds.
• For homes that will be your primary residence, the rebate can be significant — but many pre-construction buyers in Toronto pay above the rebate threshold and see limited relief.
• Builders often include HST in the advertised price and assign the rebate to themselves — but only if you occupy the home as your principal residence. If you intend to rent the unit, the builder may require you to pay the full HST back.

Always clarify how HST is handled in the purchase agreement and confirm with your lawyer.

Occupancy vs. Registration (Condos)

For new condos, there is often a gap between occupancy date (when you can move in and start paying "occupancy fees") and registration (when the condo corporation is officially registered and title transfers to you). During this period:

• You pay monthly occupancy fees to the builder (similar to rent)
• You do not yet own the unit — your mortgage has not yet been funded
• This period can last months
• You cannot typically make renovations during occupancy

Builder Contract Terms to Watch

New construction contracts heavily favour the builder. Critical clauses to review:

• Permissible delays: Builders can typically extend closing dates by 12 to 24 months beyond the scheduled date (sometimes more) with limited penalty
• Permitted changes: Builders often reserve the right to change finishes, floor plans, and features within certain parameters
• Price adjustment clauses: Some contracts allow builders to pass on development charge increases, levies, or other costs added after your purchase
• Assignment provisions: Whether you can sell your unit before closing and the terms for doing so
• Upgrade credits and caps: Understand what is included and what you are paying extra for in the design centre

Delayed Closings

Construction delays are common. Projects routinely close 12 to 18 months after the original expected date. Your mortgage rate hold (typically 90 to 120 days) will expire long before your condo completes. You will need to renew your rate hold (potentially at a higher rate) multiple times. This is a real financial risk in rising rate environments.

New Home Warranty

New homes in most provinces come with statutory warranties. In Ontario, Tarion administers the warranty program. Coverage includes defects in materials and workmanship, structural defects, and violations of the Ontario Building Code. See the Home Warranty guide for details on coverage periods.

Bring Your Own Agent

The sales agent in a builder's showroom represents the builder — not you. Bringing your own buyer's agent costs you nothing (the builder pays the commission) and gives you an advocate who has seen issues with that builder's contracts, quality, and process before. Register your agent on your first visit to the sales centre.