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Navigating Pre-Construction: Essential Closing Costs

holding keys to home

Acquiring a condominium marks a significant milestone, but amid the excitement, it's imperative to factor in the financial responsibilities that come with this substantial investment. One critical aspect for potential condo buyers in Ontario to be mindful of is the concept of closing costs. These expenses, distinct from the purchase price, can accumulate significantly and should be included in your budget. In this article, we will delve into the specifics of closing costs associated with purchasing a pre-construction condo in Ontario, equipping you with a comprehensive grasp of what to anticipate and how to plan accordingly. Whether you're a first-time buyer or seasoned in the real estate market, being well-versed in the nuances of closing costs will empower you to make well-informed decisions and ensure a seamless transition into your new condo.


When procuring a pre-construction condo, the deposit is typically disbursed in installments throughout the construction phase. Below outlines the typical deposit structure:

Initial Deposit: Upon signing the purchase agreement, you will be obligated to furnish an initial deposit. While the amount can vary, it generally hovers around 5-10% of the purchase price. This deposit is due shortly after signing the agreement and is held in trust until construction commencement.

Interim Deposits: As construction advances, the developer will specify specific milestones or stages where additional deposit payments are due. These payments are termed interim deposits. The timing and amount of these deposits are delineated in the purchase agreement.

Final Deposit: The final deposit, also referred to as the closing deposit, is due upon occupancy or upon construction completion. It typically constitutes a substantial portion of the purchase price, often around 5-10%. At this juncture, the condo is prepared for occupancy, and the final deposit is requisite before the buyer can take possession.

It's crucial to note that the deposit amounts and payment schedule may vary contingent on the particular pre-construction project and developer. It is imperative to meticulously scrutinize the purchase agreement and seek advice from a real estate lawyer or professional to comprehend the deposit structure and linked obligations. In the event of any complications or cancellations, the buyer may be entitled to a deposit refund as outlined in the purchase agreement terms or regulated by the Tarion warranty program.


This tax is paid by the buyer to the province upon transferring the property's title into their name. This can add a significant amount to the final bill. First-time homeowners are eligible for a land transfer tax rebate. Here is the breakdown for the Ontario Land Transfer Tax:

- 0.5% on the first $55,000

- 1.0% on amounts between $55,000 and $250,000

- 1.5% on amounts between $250,000 and $400,000

- 2.0% on amounts over $400,000


When purchasing a pre-construction condo, the purchase price typically encompasses HST. In Ontario, there are HST rebates available for buyers, designed to offset a portion of the HST paid on the purchase price. However, the rebate is subject to specific conditions and eligibility criteria. To be eligible for the rebate, the buyer must intend to use the condo as their primary residence and follow a process of filing paperwork with the Canada Revenue Agency (CRA) post-closing. Alternatively, adjustments can be made at closing for the HST, ensuring the buyer only pays HST on the portion of the purchase price attributed to the time after the condo is deemed substantially complete. These adjustments are typically calculated by the lawyer handling the transaction.


Pursuant to the Ontario New Home Warranties Plan Act, builders are mandated to provide warranty coverage for new homes, including pre-construction condos. This coverage shields buyers against certain defects and ensures builders adhere to specific construction standards. The Tarion Warranty Fee is an expense linked with the warranty coverage provided by Tarion. As the purchaser, you are responsible for covering this fee, which is usually encompassed in the closing costs. The fee amount hinges on the condo's purchase price and is stipulated in the purchase agreement.


Legal fees are a standard closing cost associated with any real estate transaction. Depending on the lawyer you engage, anticipate a range between $1,500 - $2,500 in legal fees. An experienced lawyer can conduct thorough due diligence on the pre-construction project to uncover any potential issues or risks linked to the development before closing. They can also meticulously review the purchase agreement within the designated review period to ensure the terms and conditions are equitable. In this process, they can identify potential risks, hidden clauses, or unfavorable provisions and negotiate on your behalf for a more favorable outcome.


Common expenses are a vital component of owning a pre-construction condo in Ontario. These fees contribute to the maintenance, operation, and administration of the shared or common elements within the condominium. The specific fee structure is determined by the condo corporation's bylaws and outlined in the purchase agreement, typically calculated based on the unit's size or square footage. During the pre-construction phase, the corporation fees may not be collected immediately. However, once the building is complete and units are occupied, the fees will be collected from unit owners on a regular basis (e.g., monthly, quarterly). It's important to note that condo fees are not fixed and may change over time to cover operating expenses and ensure the condominium's financial stability.

It's crucial to acknowledge that the precise costs can vary based on the condo's purchase price, location, and individual circumstances. It is imperative to thoroughly review the agreement of purchase and sale to grasp the deposit structure, payment schedule, refund policies, corporation fees, and other pertinent details. Consulting with a real estate professional or lawyer is recommended to obtain an accurate estimate of the closing costs for your specific situation.

If you have any questions about the pre-construction process, or would like to speak to an expert agent, please don't hesitate - we would love to help!

REXIG Professional Services offers legal, accounting, property management. We are here to help you achieve success, and provide an end-to-end solution for any of your real estate needs.


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