The Ultimate Buyer’s Guide for Buying A Pre-Construction Condo in Toronto

The Ultimate Buyer’s Guide for Buying A Pre-Construction Condo in Toronto

Justo Team | May 29, 2019

While home prices and the real estate market in the Greater Toronto Area (GTA) have been steadily increasing over the past few years, condo prices especially in Toronto, also have been steadily increasing. Therefore it should be no surprise that foreign investors are interested in buying condos in Toronto. Recent research shows that 10%, 1 in 10 condos, built in Toronto during 2016 and 2017, are actually owned by non-Canadian residents.

While you may not have considered purchasing a condo, in the pre-construction phase, there are many benefits you can enjoy if you are purchasing a condo during its pre-construction phase. These benefits range from saving money and ideally seeing a large return on your investment when the time comes to sell your condo, the possibilities for customization, the convenience of having a new home, and more. However, buying a condo during the pre-construction process might not be the right choice for everyone. It is important to consider the pros and cons and whether or not buying a pre-construction condo is the right choice for you before you consider purchasing a pre-construction condo.

Related article: The Ultimate Buyer’s Guide for Buying a Condo in Toronto

Pros for buying a pre-construction condo in Toronto and the Greater Toronto Area (GTA)

If you purchase your condo early on during the pre-construction process you might be able to purchase your condo with a minimal down payment, while your condo’s value will theoretically appreciate over time. This allows you to buy a home at today’s prices and doing this will allow you to enjoy how your home has increased over time. Moreover, if your present financial situation is not where you would like it to be today, you can still purchase a new condo and while it is being built, gain time and motivation for you improve your financial situation before you will be financing your condo.

Other advantages of purchasing a condo during the pre-construction phase are the possibilities for customization since your condo will be built in your style and preferences in mind. The customizations you are adding for your condo have the potential to improve your condo’s resale value while differentiating it from your neighbours’ homes before it is even finished. This is great since it will help you to avoid future renovations which can be expensive, time-consuming, and headache inducing. This means your condo will be painted with your colour palette, complete with your desired finishes, appliances, and more, saving you time and money since all of the work will be completed before you even arrive. Another benefit to purchasing a brand new condo is how new homes are usually designed and constructed with design elements that are popular today, such as open floor plans, larger eat-in-kitchens, and walk-in closets.

Additionally, new homes usually are designed and built with the latest technology such as alarm systems, speaker systems, internet, and cable wiring. Having these built-in saves you time and money. Another financial benefit for new homes is that you hopefully will not need to do as much maintenance in the first few years like you would need to do for an older home since your home will be equipped with brand new appliances, plumbing, heating, air, and electrical systems. Helping you avoid needing to do repairs and maintenance for a few years. While building homes with new construction materials can help ensure that newly built homes are more energy efficient than older, existing homes, potentially lowering your utility bills and cost of ownership.

Another advantage of condo living is you can live in a more desirable neighbourhood with excellent restaurants, and plenty of amenities that you will not find in neighbourhoods, especially newly built neighbourhoods further away from Toronto’s urban center. The closer you are living to downtown Toronto, the more you will benefit from easy access to public transportation which means you might not need a car, meaning you can save thousands of dollars on car insurance, gas, parking, etc. since you might be walking distance from public transportation, stores, restaurants, supermarkets, and more. This is a notable benefit given that there are reports of people paying over $40.000 CAD per year for a parking space in downtown Toronto. Being able to choose to not have a car if you live in an area such as Toronto which is known for having nightmarish traffic is a privilege and could seriously improve your life.

Choosing a condo life means that you might have the opportunity to live in a higher-end neighbourhood in Toronto, where you might not otherwise be able to afford to buy a house. Given the high cost of rent in Toronto, it is possible that a mortgage + condo fees might be equivalent to or not much more than monthly rent for an apartment in a desirable neighbourhood. While for some, condo ownership might be more economical than owning a house.

Related article: Tips for Buying a Condo in Toronto

While living in a condo with a variety of amenities such as a pool, fitness center, party room, etc. means that you might be more social and get to know your neighbours more easily and organically living in a condo as opposed to living in a house. Having these shared amenities provides you with the opportunity to meet more people. It could also motivate you to be more physically active since you will have fewer excuses for missing the gym if there is a gym in your building, as opposed to having to leave your building to go to work out. Living in a condo also means that you might have access to some of the amenities you could enjoy renting an apartment but with the benefits that come with owning your own home.

Another benefit for condo living is all the costs for maintaining the building are shared. This means the costs for repairs for the building, maintaining the communal areas, paying someone to shovel snow and do other things are shared between residents. When it snows you do not need to worry since someone else will be responsible for shovelling snow and spreading salt and sand out onto the walkways outside of your building. If you are looking for a low-maintenance home, this is a huge benefit for you.

Security is another benefit of owning a condo. If you are lucky you might find a condo building with a doorman and/or controlled entry. Since you will probably have neighbours on both sides of your unit, this is great if you travel frequently since you will be able to worry less about your home while you are gone. If you shop online frequently, condo living can be great since your packages will not be left on the street in front of your home where they could be easily stolen by someone walking by your house.

Finally, condos can be a great choice for those who want to own their own space without buying a house and do not want to deal with all of the headaches homeownership brings. This makes condo ownership a great option for people looking to downsize, people who want to have a more minimalist lifestyle, and/or looking to invest in the real estate market who might not be ready or willing to buy a house.

While there are many pros for buying pre-construction or new construction condos, there are some potential cons you need to be aware of. It is important to remember that condo living might not be for everyone.

Related article: 5 Common Mistakes to Avoid for a First Time Home Buyer in Toronto

Cons for Buying a Pre-Construction Condo in Toronto

First, brand new homes, whether they are houses or condos can be significantly more expensive to purchase than older, existing homes and condos. Sometimes purchasing a brand new condo can cost up to 20% more than purchasing an older, existing condo. Also, the fabulous amenities you saw in the model condo suite can add up. It is important to remember that the upgraded features in brand new homes are significantly marked up to ensure that the builder is turning a profit and they can end up costing you far more than you ever expected. For example, it may cost your builder $6,000 to install granite or marble countertops in the kitchen in a model home, but these counters might cost you $12,000 or $13,000.

Related article: How to invest wisely in Toronto’s real estate?

Condo Fees, Assessments and more

Another potential con for condo ownership is the fees you will be responsible for paying as a condo owner, such as special assessments, condo association fees and dues, and more. While your condo fees should cover the maintenance, insurance, and other costs for everything outside of your unit, they only everything outside of your unit. Therefore if you will need to do repairs for anything inside of your unit, you will be responsible for paying these costs and completing these repairs.

Condo fees are not fixed, but they tend to increase over time. While what you pay in for monthly condo fees helps pay for the maintenance and upkeep for your complex, if something unexpected happens to damage a communal area, you and the owner condo owners will be responsible for paying them. For example, if one of your neighbours damages the common area, everyone in the complex would be assessed for the cost of repairing these damages even if you, were not at all involved in what your neighbour did to cause this damage.

Ideally, when a condo association’s capital reserve fund is appropriately managed this will help to ensure that repairs and maintenance for the complex will be done without any additional cost for condo owners. However, this is not always the case. Legally, by choosing to own a condo, the following situation could happen to you. Something could happen and a board member from your condo association could show up your condo, knocking on your door, informing you that you need to pay thousands of dollars for a special assessment. In other words, if your condo association runs into any legal issues if any unexpected costs come up or your condo association is over the budget you and all of the other condo owners in your condo association will be responsible for paying these costs. You might be wondering how this could happen. This is legally possible because owning a condo means that you are responsible for paying the fees set out by your condo association, whether you want to pay them or not.

Another important consideration related to condo ownership is the joint property aspect of condo ownership. When you own a condo, you are jointly owning a property with people you might not know or would otherwise choose to own property with. Also, the people who you will own this property will be constantly changing throughout the time that you own your condo. This is important to remember since you will only be in control of what happens within the confines of your unit, you will have a limited say or choice when it comes to group decisions affecting the complex. In other words, if you do not want to redecorate the lobby or make a decision about what colours you want to paint the hallways, if other condo owners/condo association members want to do this, it is up to the others in your condo association as to whether or not this happens and when this work will be completed.

When you own a condo once you finish paying off the mortgage for your condo, you will still be responsible for paying your condo fees or dues since these fees will never be going away, condo fees are eternal. This is an important consideration since monthly condo fees can range from $300 to $800 dollars or more per month depending on where you are, what your condo fees include, and the amenities your complex has. If your complex has amenities such as a swimming pool, fitness center, or elevators these amenities can drive up your condo fees. While it is important to consider that older buildings generally need more repairs and maintenance.

Hypothetically if your condo fees tripled during your tenure as an owner, when the time comes to sell your condo, it is possible that it might be harder for you to find a buyer who is willing to take on a mortgage and exorbitant condo fees. This means that when the time comes to sell your condo you may need to lower your asking price and risk losing a return on your investment in you want to find someone to buy your condo. When purchasing a condo this is a risk that you will be taking.

Condo Association Rules

Condo association rules and bylaws are another important con that you will need to consider. These rules and bylaws govern what you can do in your unit, and other things such as what types of pets and how large the pets you can have can be. Not everyone will be willing and/or able to have to abide by the rules set out by a condo association since they restrict what you can and cannot do as a condo owner. Others might have problems living in close proximity to others, especially since you cannot pick your neighbours when living in a condo.

Appreciation and Return On Your Investment (ROI)

Another risk you run with purchasing your condo is if you treating your condo as an investment, it is the possibility that over time you might not see as high of an ROI with a condo as you would see with a house. You should compare past real estate prices for condos in your area to see whether or not this might be the case for you. This is important to consider since many condos are currently being built all around the City of Toronto and the Greater Toronto Area.

Furthermore, if you are doing major repairs and renovations for a condo, they might not translate into your condo increasing in value when it comes time to sell. This is usually not the case for houses since completing major repairs and renovations for a house has the potential to raise your house’s value and allow you to list your home with a higher asking price.

The Possible high costs of ownership for a condo

While purchasing a condo in the short term might be more economical than buying a house, your costs of ownership for a condo in the long term might be higher for a condo than a house. It is possible that while the initial purchase price condo might be lower than the initial purchase price for a house, you might have a better return on your investment when you are buying a house.

You’re responsible for everything in your unit

When you are renting you are not usually responsible for repairs inside your unit. When renting, if one of your major appliances breaks, you will not be on the hook for replacing appliances when they break or responsible for the repair costs associated with fixing a broken appliance. However, when you own a condo, you are allowed to paint the walls and renovate your unit, but you will also be responsible for repairs for anything that breaks inside your unit. In other words, if your refrigerator breaks and needs to be repaired or replaced you will be solely responsible for repairing and/or replacing it. Furthermore, you will have to pay to ensure your unit and all of your belongings. You need to have a clear understanding of what you are responsible for and not responsible for when buying a condo.

While buying a condo during the pre-construction phase for a project might be great for you, there are definitely some lifestyle factors you will need to consider before making any decisions about whether or not this is the right choice for you. It is important to remember that you are not only buying a condo, you are also buying a home and into a neighbourhood.

There are several steps involved in the process of purchasing a pre-construction condo. The steps in this process will vary from agent to agent, broker to broker, and developer to developer. However, the steps listed here represent the basic components of this process.

Steps for Buying a Pre-Construction Condo in Toronto

1. Finding A Great Real Estate Agent/Broker To Represent You, The Buyer

Before beginning to looking at pre-construction condos, you should find a great agent or broker who has experience working in pre-construction, in new construction, condos and is knowledgeable about the neighbourhood(s) you are interested in. You should also like this person and feel comfortable working with them since you will be working with them for a long time.

It is important to remember that the model condo suites might be where you can see what the final product might look like, they are usually staffed by real estate agents who have a relationship with the builder or developer selling these condos. These real estate agents or brokers usually are representing the builder or developer, as the seller’s agent and they are duty bound to act in the seller’s best interest. The seller’s agent’s primary job is to ensure that the seller is getting the highest price possible for the homes they are selling. Therefore, it is essential that you have your own agent or broker who can best represent your interests, as the buyer.

A real estate agent or broker representing you as the buyer is duty bound to act in your best interest. Your real estate agent or broker can do things such as advising you how to best structure your offer so it is most appealing to the builder/developer, can recommend other professionals who can help you throughout the purchase process such as lenders, movers, real estate attorneys, home inspectors, etc. Your real estate agent or broker has another important role as they can act as mediators between you and your builder, helping you to resolve any problems during the building process. They also can provide guidance as you are making choices that will influence your home’s resale value. Furthermore, your agent or broker should know the neighbourhoods and areas you are interested in so they will be able to help you decide which areas, developments, and new projects might be an ideal fit for you, your needs, budget, and more.

Although, it is important to remember that some developments will have site registration policies requiring your agent to accompany you on your first few visits. Before visiting any developments and home sites you are interested in seeing, you should ask your agent to check the site’s registration policy before you visit. Your agent might be able to register you online or call to register you, which means that you might be able to visit the model condo suite at the site at your convenience. Or you can arrange a time with your agent to look at the community together.

Related article: How to choose the right real estate agent when buying a home in Toronto?

2. Investigating the builder’s/developer’s reputation and completion record for other condo developments

Assuming you have a found a project in the pre-construction phase that interests you, you will need to investigate the builder’s/developer’s reputation and completion rate before deciding to move forward with buying one of their condos. If you are not sure where to start investigating your builder’s track record and reputation you can always visit one of their other developments and speak with homeowners, and search online for reviews, testimonials, and news related to the builder/developer.

When investigating your builder or developer’s reputation you should always remember that many builders have happy and unhappy past clients. When researching builders and developers look for trends in reviews and make sure that you cover any concerns you may have in the purchase agreement documents. You can also ask if your agent has worked with the builder or developer in the past and/or is aware of their reputation. Another good place to look into your builder/developer is local homebuilder’s websites. If you are in the Greater Toronto area you can check out the Greater Toronto Area’s Building Industry and Land Development Association (BILD) website.

3. Visiting a condo site and learning about your potential new neighbourhood

If you are interested in some projects in the pre-construction phase, you will need to arrange a time to visit a project site. Visiting project sites will help you get an idea of what living your potential new neighbourhood might be like since you will gain greater insight into how far away your potential new home would be located from schools, shopping centers, restaurants, transportation, etc. During these visits, you should definitely inquire about any future plans for commercial expansion in this area, e.g. are their plans in the works to build or expand upon any commercial areas, for more residential development, etc.

Related article: The Most Affordable Neighbourhoods in the Greater Toronto Area

4. Visiting a model condo suite

On this visit, you will probably see a top of the line model condo suite in a given development. It is important to remember that model homes/condo suites are always going to look beautiful, they are meant to look beautiful. However, you might not realize that the features and amenities you fell in love with in a given model condo suite, might be upgrades that you will need to pay extra for. Moreover, the fit and finish of a model condo suite do not necessarily represent what will come standard with a condo. You can always ask to see basic model condos if they are available, seeing a basic model condo suite is a good idea since you will be able to gain greater insight into what your home might actually look like when it is finished.

Model condo suites usually are a mix of features that are a standard part of the condo and additional upgrades. When you are touring model condo suites, be sure to find out which features and amenities come standard with the home and which features or amenities are upgrades that will cost extra. It is important that you figure out exactly what’s available, what you will be getting, and how much it will all cost. It is important to note that costs can change. In other words, the quoted price you received at the start to buy a condo, might not be the same as the price you will end up paying when you decide to move forward and purchase your home. You can ask your agent to get you a list of standard features and if available, a list of common upgrades and their associated costs.

This is not to say that upgrades are not worth the cost, this is to remind you that adding upgrades to your condo will cost extra and you will be paying for them. You should also ask to see samples of the builder’s finishing touches, such as lighting and plumbing features, so you can decide whether or not you like their finishing touches or want different ones. It is important to remember that upgrades in your future home are an investment because they can help add to home’s resale value when you are ready to sell your condo. However, whatever upgrades you are adding to a condo will need to be worth it. Finally, it is important to remember that builders and developers’ turn a large profit with upgrades. While there might be a little room for bargaining with the base sale price for a new condo, it is recommended that you should try to negotiate the price for any upgrades you wish to add. The more upgrades you add to your home, the more leverage you will have when haggling over the final price of your home with your builder/developer.

5. Getting Creative During the Negotiation Process

Assuming that you have found a pre-construction condo, you love and wish to purchase, now it is time for you to try your hand at negotiating. It is important to remember that builders and developers do not enjoy lowering their prices since they are reluctant to set a precedent for negotiating prices with buyers, because future buyers might expect to receive the same discounts that you might have received. While it may be possible to negotiate a bit with the base price for your home, you can be creative with your negotiations and ask for discounts for other things.

You can also consider asking your builder or developer to pay for your closing costs or perform upgrades in your condo for no additional cost. However, it is important to note that builders are frequently more likely to negotiate on the “back end” since covering a buyer’s closing costs or giving buyers a deal on upgrades for their homes are a more subtle way they can sweeten the deal and convince you to buy one of their homes. If you are considering a potential offer, you can ask your agent to research a builder or developer’s negotiating style for prior sales in the community and for other developments they have built to determine if there is any particularly effective way to approach their offer and your negotiations with them.

Related article: How to choose the right mortgage broker in Toronto?

6. Getting Everything In Writing

Before you do anything, DO NOT sign anything until everything has been negotiated, agreed upon, and written into the contract you will be signing to purchase your condo. If you are purchasing a home or condo during the pre-construction or construction phase and it has not been completed, it is essential to spell out in the contract, how the home will be finished, what will happen if there are construction delays, and deadlines for decisions that you will be making throughout this process and the payments that you will be making throughout this process. You should also have the builder or developer include in the purchase agreement, how much your Homeowners Associations or condo association’s fees and other fees will be.

If there is no legally mandated cooling off period in your province for new construction when you are purchasing your home directly from the builder or developer, you should definitely ask for a cooling off period to be added to your contract with a right of rescission. A right of rescission is important because it allows you to withdraw from a deal before the cooling off period has ended for any reason and receive a full refund for any money you may have paid.

Finally, it is important to note that verbal conversations are not legally binding, so

everything important, every little detail no matter how big or small should be put into writing into the contract and signed by all involved parties. While this may seem excessive, this is for your own benefit. Finally, it is not uncommon for builders or developers to use customized purchase agreement documents instead of using standard purchase agreement forms commonly used in your area. If this is the case, you should definitely ask should ask your real estate agent or broker to get you a copy of the builder’s purchase agreement documents so you can review them before you commit to signing any contracts.

7. Getting a guarantee and finding out what is covered by the warranty

You will need to figure out what guarantees that you will have from your builder/developer that you will have that your home will be ready on time since you are purchasing a home that has not been completed yet. This is important since your purchase agreement documents should specify a completion date. However, it is important to note that many builders will add provisions that make the completion date contingent on them receiving permit approvals from a municipality or building materials from suppliers. Furthermore, you might be responsible for paying a penalty if you are unable to close on time because your lender is not ready with your financing for your home. In order to prevent this from happening you can ask your agent to explain to you what will happen in the event of a delay on the builder’s side or the buyer’s side. You need to gain a clear understanding of what happens when there are delays since there are frequently delays with residential and commercial construction projects. Your agent should also negotiate a guarantee in case of the rare occurrence that the project is cancelled.

Before signing any Agreement and Purchase of Sale (APS) documents, you will need to figure out what the warranty for your new home covers. This is important since many new homes built in Canada are delivered to buyers with a warranty from the builder. However, you should always remember that not all warranties are the same or are created equally. Canadian provinces such as Quebec, British Columbia, and Ontario, all have legally mandated warranty coverage for newly built homes, this also includes condos. While builders in other provinces in Canada, may try to convince buyers to opt out of warranty coverage by saying they are saving buyers from registration fees, do not fall for this. You will definitely need to find out what is and what is not covered under the warranty and how long the warranty lasts.

Related article: GTA home buyers and sellers are overpaying by thousands

You will need to remember that many builders tend to use a third-party warranty company. In some cases, manufacturers of certain products, such as windows, may have a separate guarantee or warranty. The builder might refer to all issues that you might have with these components of your home to the manufacturer instead of handling these issues directly themselves. Your builder should be able to provide details on which part of the home is covered by which policy/warranty. You should ask your agent to get information on the warranty available early on in the process so your offer documents will be prepared in such a way that you can address any concerns that you may have up-front before signing any purchase documents.

8. Signing the Agreement of Purchase and Sale (APS)

At this point, you should be ready to make the leap to sign the papers to purchase your future home! When the day comes to sign the Agreement of Purchase and Sale (APS) documents, you will need to arrive at this appointment prepared, with your government-issued photo ID and your chequebook, since you will not be able to purchase your home without them. Your real estate agent will walk you through the process and answer any other questions you might have.

It is important to remember that a new home’s purchase agreement is a legally binding document, spelling out the conditions of the sale and each side’s obligations. APS documents tend to be written in legalese and full of fine print. If you are signing it without understanding all of the terms and conditions, you might be stuck agreeing to substitutions, inclusions or exclusions you do not want. Either before signing the APS or when you have signed the APS, you need to figure out any milestone payments you might be responsible for. In other words, will you be expected to pay at certain stages of construction or will be paying the full price of your home at closing?

9. The Cooling Off Period

Ideally, your APS documents will include a legally mandated cooling off period, which allows you to back out of a deal before this period ends and receive a refund for any money that you would have paid. During this period, if you have not already done so, you should definitely have a lawyer with experience working in pre-construction review this agreement and go over it with you. If you have not already done so, you will need to secure pre-approval from a lender or a commitment letter from your financial institution and do any other important tasks related to the purchase process. During this period, your condo will be on hold under your name for however many days the cooling off period lasts and you will be 100% protected in case of an emergency.

10. Finding a Lender and Getting Pre-Approved for a Loan

If you will need a mortgage to purchase your condo, if you have not already done so, you will need to secure pre-approval from a financial institution or a commitment letter in order to proceed with the purchase of your home. Something to keep in mind is if since your condo has not been completed yet, you cannot officially register your home and register for a mortgage.

When securing financing for your home, you should be shopping around for lenders and find the lender/financial institution who can give you the best rate. Despite anything your builder or developer promises you about getting you a good rate with their lender, your lender does not have to be the same lender your builder or developer is using.

11. Your Builder/Developer Cashes Your First Check

If you have reviewed the APS documents and find that you are satisfied with the purchase agreement after the cooling off period, this contract can be finalized and your first deposit check will be cashed one day after the cooling off period. This will be following the date you signed the contract has passed. Congratulations, you are one step closer to being a homeowner! Your deposit checks should be processed accordingly. You should be sure to check that you will have sufficient funds in your account on the specified dates that were provided to you in the sales agreement. You will be receiving a receipt each time the developer has cashed one of your checks.

12. Begin working with the builder/developer to customize your condo

While your condo is being built, you will be in contact with someone in your builder/developer’s office about customizing and designing your home. You will be working with them as you are picking colours, finishes, and upgrades for your home. At this point, this is when you will be working with your builder/developer to turn your condo into your dream home.

13. Home Inspection

You should have your home inspected before closing on your home. The first time your home inspection will be mandatory since all newly built homes under warranty have to be inspected. This first inspection will happen with your builder shortly before the condo is delivered to you. This is the time when you will be making sure that the builder lives up to the promises set out in the purchase agreement. If there are any deficiencies, you will need these deficiencies down on a list and have your builder sign off on this list of deficiencies. This is important since if these problems are not written down on a list and your builder does not sign off on this list, your builder, your builder will not be obligated to fix the problem(s).

The second inspection should happen about a month before your home warranty is due to expire. Your home should have gone through all four seasons to ensure that enough time has passed for any major defects from settling or cracks to appear.

It is important to remember that there are different deadlines for warranty claims, you should be marking your calendar with these deadlines and be sure to submit any warranty claims at least five days before the warranty deadline. As a new homeowner, it will be your responsibility to ensure that your warranty remains valid. For example, if you have to change your furnace filter if you claim to have heating deficiencies, you will need to report this. Your builder should leave you with copies for the manufacturer’s warranties on the components and products used to build your condo during the first inspection before closing.

14. Moving In: Interim and Final Occupancy

There are two important dates and stages during the closing process, the Interim Occupancy stage and the Final Closing stage. You will be meeting with your lawyer and your real estate agent during these final closing stages.

You will meet with your lawyer the first time when your builder/developer contacts you to inform you that your condo is ready for Interim Occupancy. At this time, you should be prepared to make any outstanding deposits and occupancy fee payments. It is important to remember that during the Interim Occupancy period you still do not own your condo since ownership of the condo has not been transferred to you from your builder/developer. Your mortgage or final payments will not occur until the Final Registration date, after closing. You should be contacting your lender approximately one year prior to your anticipated occupancy date to have your mortgage letter updated so you can avoid paying increased interest rates.

However, it is important to remember that during the interim occupancy stage, you will be making interim occupancy fee payments which are not going to be applied to your mortgage or your home.

The second time you will be meeting with your lawyer during this process will be

shortly after the final closing date so you can sign all of the documents to officially transfer ownership of your condo from your builder/developer to you. At this point, your mortgage will begin and your lawyer will explain all of the outstanding costs you will be responsible for paying to finalize this purchase. Once you have signed all of these documents and paid any and all outstanding fees, congratulations, you are officially a homeowner!

Questions you should be asking when looking at pre-construction condos

Before deciding to purchase a pre-construction, condo or move into a condo community, there are a series of questions that you should ask. Finding out the answers to these questions can help you to decide whether or not living in a certain condo community is the right choice for you and your family.

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What are the condo association rules?

Before deciding on whether or not condo living is right for you, you need to figure out what the condo association’s rules are, whether or not you are willing to abide by these rules. In other words, are you are ok with restrictions about things such as pets, and rules regulating any upgrades you wish to add to your unit?

You should ask to review a copy of the Homeowners Association’s or condo association’s covenants, conditions, restrictions, and bylaws, so you can understand all of the rules and ascertain if living in this community is the best choice for you. You should ideally have your attorney also review these documents and go over them with you so you can understand what you are agreeing to by choosing to live in a certain community.

How much are the monthly and yearly HOA/Condo association fees and assessments?

This is another important question since you should find out what things from this list are included in your monthly and yearly HOA/condo association fees and any special assessments you might be responsible for paying. You should also inquire as to whether or not any major renovations or expansions are planned for your community.

Is there any additional work planned for the community (for example: adding any new amenities, changes to the common areas, etc.)?

Finding out the answer to this question is especially important since this knowledge can help you to figure out what if any phases of the community have been completed if any have been completed. And if any planned phases for the community have not been completed, how long additional work may take and whether or not any additional work is planned.

How much money does the association who manages the complex have in reserve in their capital fund?

If you are looking into moving a condo complex, you should find out how much money the condo association which manages the complex has in its capital reserve fund. The funds in the association’s capital reserve fund usually are used to cover any additional expenses which arise. Generally, this reserve fund should contain at least 10 percent of the association’s annual revenue budget. This information is important since if the association does not have sufficient funds in its capital reserve funds this means that you might be at an increased risk for paying a special assessment (additional fees that the association will charge owners to cover the costs for capital improvements).   

Who fixes what?

It is important that you find out which repairs and possible maintenance issues you will be responsible for and which items the condo association will be responsible for fixing.

If you are living in a condo complex, who manages the complex?

If you are looking into moving into a condo, you should find out if there is a professional management company responsible for managing the complex. Having a professional management company charged with managing the complex might cost you more money up front, in the short term, but in the long-term, it might save you money and headaches. This is important since companies or people charged with managing a large number of condo communities might have greater negotiating power for maintenance services such as lawn care.

How many units are currently for sale in the complex and are any units in foreclosure? Is the condo association involved in any legal disputes?

This is an important question since the answer to this question can signal trouble within the association and possible future costs you might be responsible for paying, such as attorneys’ fees.

What are the community’s common areas? What are the rules and hours regulating their use? What does the parking situation look like? Where would your parking space(s) be? What is the situation with guest parking? How many investors have bought into the building or community?

Additional Questions/Information You Should Ask:

You will need to speak with your lender to figure out which type of loan will be best for you so you can purchase a home within a given community. Your lender will have specific questions about the complex, how many units are owner-occupied, what percentage of association fees, are delinquent, etc.

Related article: The Best High Schools in Toronto and the Greater Toronto Area (GTA)

Important Considerations for Pre-Construction Condos

Whenever making an important decision such as buying a home, especially a new home during the pre-construction phase, there are some things you should keep in mind, such as taxes, length for completion, your objectives for buying a pre-construction condo, and more.

First, Taxes

It is important you know that unlike resale homes, the GST/HST, the Goods and Services Tax (GST)/the Harmonized Sales Tax (HST) is applied to the price of a new home in Canada, this includes condos. This tax can significantly increase the overall cost of a new home since it is approximately 5% of the purchase price. Although you might be able to receive a 2-3% rebate from for the money you paid.

Second, are you prepared for the possibility that your home might be completed one or more

years after you have purchased it? Are you prepared for the possibility that the anticipated date of completion vs. the actual date when you will be able to move into your condo might be months or years after the original promised delivery date? There are almost always delays with construction so it is important that you can be patient and flexible given that it is more than likely that construction will be delayed.

Other things you should consider are: if you are prepared for the likelihood that your money might be tied up for years? Will you be able to qualify for a mortgage upon your condo’s completion? What might interest rates be doing years from now? What is your objective in purchasing a condo during its pre-construction phase? Are you planning to live in this condo or will this be a condo that you will be renting out? If you plan on renting out this home once it has been finished, you will need to consider factors such as how many other investors there might be in your development? Are you prepared to wait for your builder to fix any deficiencies for you or your tenant?

Finally, another important consideration for condos is what distinguishes them from townhouses and regular, free-standing houses. When you own a condo, you own your unit, but you also own a share in the ownership of the land where your complex is located, the building where your condo is located and the common areas in your complex. When you have a condo, and you share the costs for upkeep with fellow members/condo owners in your condo association. In this scenario, the Board of Directors for your condo association or the property management company charged with managing your complex is entrusted makes the big decisions about the maintenance, upkeep, etc.


Buying a pre-construction condo might be the right choice for some, it is not the right choice for everyone. There are some inherent risks you will face whenever you are buying real estate during the pre-construction phase, this is especially true for purchasing pre-construction condos. Making the decision to buy a pre-construction condo is definitely not ideal for those who are risk-averse, need their unit to be finished on time, need to move into their new home quickly or want a quick return on their investment. Construction takes time and you might not get an immediate return on your investment.

However, if you do your research, negotiate well, are patient and are prepared for all the possible trials and tribulations that are part of buying a pre-construction condo, with some luck, your investment could turn out favourably for you. In order for you to reap the rewards of your investment, you will need to do your due diligence and seriously consider whether or not buying a condo in the pre-construction phase is the right choice for you.

Photo by Valik Chernetskyi on Unsplash

By Justo Team

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