When you sign up for a preconstruction property, you’ll receive a thick builder contract with many clauses. During the 10-day cooling period, it’s important to have a lawyer with preconstruction contract experience review your Agreement of Purchase and Sale.

These contracts often use complex language and specialized terms that can be difficult to understand. Builders may include extra fees or situations that could trigger additional costs you should know about. They typically reserve the right to change your unit’s layout, finishes, or occupancy date.

Your lawyer will explain these builder rights and how they might affect you. They’ll verify that your contract includes Tarion warranty coverage, which protects you against construction problems. 

If construction gets delayed, your lawyer can tell you what happens next and if you’re entitled to compensation. They’ll also explain how disputes with the builder are handled if problems arise.

Having a lawyer experienced with builder contracts review your contract helps you understand your rights and the builder’s responsibilities before you finalize your purchase.

When buying a preconstruction property, understanding the HST (Harmonized Sales Tax) implications is crucial as they affect regular buyers and investors differently. Here is a general overview of HST considerations, but remember that tax rules may change over time, so you are strongly recommended to consult a tax professional.

Most builders include the 13% HST in the purchase price of preconstruction properties. However, it’s important to verify this, as some might advertise prices before adding HST.

End-users may qualify for a partial HST rebate when buying a new home as their primary residence. The federal rebate offers up to 36% of the GST portion (maximum $6,300) for homes priced at $350,000 or less, with decreasing rebates for homes up to $450,000. The provincial rebate provides 75% of the provincial portion, up to $24,000.

Investors buying properties for rental purposes must pay the full 13% HST upfront. To qualify for a rebate, the property must be leased to tenants for at least one year, with a lease agreement as proof. The rebate process happens after closing and can be complex.

Primary residences in Canada are exempt from capital gains taxes when sold. However, investment properties are subject to capital gains tax, with the gain added to your taxable income for the year.

Given these complexities, we recommend consulting a tax professional experienced in Ontario real estate transactions. Your realtor can provide general guidance, but for specific advice on your purchase’s tax implications, speak with a tax accountant or tax lawyer.

When purchasing a preconstruction property in Ontario, you’ll have to pay development charges. These are fees that municipalities charge developers to cover infrastructure costs like roads, schools, and parks. The builder will pass some of these charges on to you as part of your closing costs.

These fees vary widely depending on the project and municipality. They’re often difficult to determine during the initial sale period and become clearer closer to closing time. In some cases, these charges can become quite expensive. 

Some builders offer a cap on the total amount a buyer will pay as a purchasing incentive. If your Agreement of Purchase and Sale doesn’t include a cap, you must speak with your lawyer to understand the potential financial impact.

Beyond development charges, your closing costs will include several other expenses to prepare for:

• Land transfer tax (with an additional tax if buying in Toronto)
• Utility connection fees
• Tarion Warranty enrollment fee
• Legal fees
• Title insurance

Always consult with your lawyer to get a complete understanding of all closing costs associated with your preconstruction purchase.

An assignment clause in your preconstruction contract allows you to sell (or assign) your contract to another buyer before final closing. Some buyers purchase new properties specifically to flip them for profit before closing.

This strategy comes with risks, especially regarding tax implications and during market downturns. If you’re buying with the intention to assign, let your realtor know first.

When builders allow assignments, they typically charge a fee ranging from hundreds to thousands of dollars. Even if you’ve negotiated a free assignment clause, you’ll still need to pay legal fees to complete the assignment.

The builder must approve every assignment. They want to ensure the new buyer has the financial capacity to close the purchase. Some contracts restrict when you can assign the property, such as only after a certain construction phase or once a specific percentage of the building has been sold.

Most builders also typically prohibit advertising your assignment sale on MLS. Doing so could breach your contract – make sure to speak to an experienced pre-construction realtor for guidance.

When considering a preconstruction property purchase, having an experienced team like RE/MAX Team Paliwal guide you through the process gives you many advantages from buying directly with the builder.

Many buyers initially consider working directly with the developer. While their representatives are knowledgeable about their specific projects, they ultimately represent the builder’s interests. Their focus remains on selling their development, regardless of whether other projects might better suit your needs.

RE/MAX Team Paliwal is your dedicated advocate throughout the pre-construction process. Our relationships with developers, built through years of successful transactions, give our clients exclusive access to VIP pricing, priority unit selection, and special incentives unavailable to the general public.

Our experience in the preconstruction market allows us to provide insights into every project in the area. We know which builders have proven track records, which projects historically show strong appreciation, which floor plans are worth purchasing and which ones you should avoid.

Our team guides you through every aspect of the purchase, from understanding deposit structures to securing the best incentives, including upgrades, development charge caps, and flexible payment terms.

We develop targeted strategies to maximize potential returns for investors and help end-users identify layouts that perfectly align with their lifestyles and affordability.

Here’s exactly what you can expect us to help you with:

• Preconstruction timelines and phases
• Contract terms
• Deposits and deposit structures
• New project launch processes and expectations
• 10-day cooling period
• Upgrades
• Choosing the right floor plan
• Appreciation potential
• Financing options
• Assignments
• Development charges
• Rental opportunities
• Local market trends
• Local rental demand
• Upcoming developments and neighbourhood growth
• Occupancy period
• Final closing procedures
• Tarion warranty
• Guidance on where to get sound tax advice
  

With RE/MAX Team Paliwal in your corner, you’re getting decades of combined expertise working to make your pre-construction purchase as smooth and successful as possible.