New Construction, Preconstruction, and Assignment Sales in Ontario

Buying a brand-new home from a builder is a fundamentally different transaction from a resale. There is no MLS listing history, no home inspection of a lived-in property, no seller's lawyer negotiating a familiar OREA form. Instead the buyer signs the builder's own purchase agreement (not an OREA form), the home is protected by a statutory warranty administered by Tarion, the builder must be licensed by the HCRA, and — for a preconstruction condo — the buyer gets a 10-day statutory cooling-off period and a long runway of deposits, interim occupancy, and adjustments before final closing. Assignment sales layer additional complexity and tax exposure on top of all of this.

Two Regulators: Tarion and the HCRA

Since February 1, 2021, Ontario split the old single-body model into two organizations. Realtors and buyers should know which does what:

• HCRA (Home Construction Regulatory Authority) — licenses and regulates builders and vendors. Every person or company that builds or sells a new home in Ontario must hold an HCRA licence. The HCRA administers a Code of Ethics for builders, sets competency requirements, disciplines bad actors, and publishes the Ontario Builder Directory. Before a buyer signs, look the builder up in the Ontario Builder Directory (hcraontario.ca) to confirm the licence is active and to review any conditions, past convictions, or complaint/claim history.
• Tarion — administers the statutory warranty under the Ontario New Home Warranties Plan Act. Tarion enrols each new home, holds builders accountable for warranty performance, resolves warranty disputes, and pays out on deposit protection and warranty claims when a builder fails. Tarion does not license builders anymore (that moved to the HCRA) — it runs the warranty program.

Rule of thumb: HCRA = who is allowed to build/sell; Tarion = what protection the buyer gets after they buy.

The Tarion Statutory Warranty

Every new freehold home and new condominium (and substantially the whole of certain conversions) built by a licensed vendor is covered by a mandatory warranty backed by Tarion. Coverage is tiered by time and the buyer cannot be asked to waive it. In broad strokes:

• Deposit protection — the buyer's deposits are protected up to a statutory maximum if the builder goes insolvent or the buyer is entitled to a refund and cannot get it. The maximum protected amount differs for freehold vs. condominium and is set by regulation — verify the current caps at tarion.com. (Deposit protection is separate from, and in addition to, any trust protection under the Condominium Act for condo deposits.)
• Delayed-closing / delayed-occupancy compensation — if the builder misses agreed critical dates without proper notice, the buyer may be entitled to compensation (a daily amount up to a capped total, plus certain living expenses). This is governed by Tarion's Delayed Closing Warranty (freehold) and Delayed Occupancy Warranty (condominium) and the Addendum attached to the purchase agreement.
• One-year warranty — the home is free from defects in work and materials, is fit to live in, and meets the Ontario Building Code; protects against Ontario Building Code violations and unauthorized substitutions.
• Two-year warranty — covers water penetration, defects in the electrical/plumbing/heating delivery/distribution systems, exterior cladding detachment, and Ontario Building Code violations affecting health and safety.
• Seven-year warranty — covers major structural defects (MSD).

Coverage exclusions apply (owner damage, normal wear, settling within acceptable tolerances, third-party/after-purchase work, etc.). Amounts, tiers, and exclusions are set by regulation and can change — confirm the current warranty schedule and dollar limits at tarion.com.

The Tarion Addendum and warranty claim mechanics

• Every builder purchase agreement for a covered home must attach a Tarion Addendum (Statement of Critical Dates and warranty terms). The Addendum governs critical dates and delayed closing/occupancy and, where it conflicts with the builder's agreement on those points, the Addendum's protections generally prevail. Read the Addendum first — it is where the real dates and compensation rights live.
• The buyer documents defects using Tarion's warranty forms at defined windows — commonly a 30-day statutory warranty form and a year-end (11–12 month) form, plus MSD claims within the 7-year window. Missing these submission windows can forfeit the ability to claim. Advise buyers to keep the Pre-Delivery Inspection (PDI) report and to file on time.

Preconstruction Condominiums: The 10-Day Cooling-Off Period

For a new (preconstruction) condominium unit bought from the declarant/builder, the Condominium Act, 1998 gives the buyer a statutory 10-day cooling-off (rescission) period. This is one of the most important consumer protections in Ontario real estate and it is unique to preconstruction condos — it does not apply to resale condos and does not apply to new freehold homes.

• The buyer may rescind (cancel) the agreement for any reason within 10 days and receive a full refund of deposits. No reason or penalty is required.
• The 10 days run from the later of the day the buyer receives (a) a fully signed copy of the purchase agreement, or (b) the disclosure statement required by the Condominium Act. If the declarant later delivers a material change to the disclosure statement, a further limited rescission right can arise.
• The disclosure statement is a detailed package: the proposed declaration, by-laws, rules, budget statement (with projected common expenses), any management contracts, and material features of the project. Buyers should have their lawyer review it during the 10 days.
• Practically: the clock is short and includes the day of delivery per the statute's counting rules — get the disclosure statement and signed agreement to the buyer's real estate lawyer immediately so the review happens inside the window.

Verify the current cooling-off length, triggers, and material-change rules at ontario.ca/e-Laws (Condominium Act, 1998) — this is a statutory right and should never be estimated from memory.

Deposits in Preconstruction

Preconstruction deposits are large, staged, and tied up for years — very different from a resale deposit.

• Structure: builders typically collect deposits in instalments (e.g., an initial amount on signing, then further amounts at set intervals or milestones, often totalling on the order of 20% of the purchase price for domestic buyers, sometimes more for non-residents). The exact schedule is in the builder's agreement — read it.
• Condo deposit trust protection: under the Condominium Act, deposits paid to a declarant for a proposed unit must generally be held in trust (or otherwise protected as prescribed) — this is in addition to Tarion deposit protection. Confirm how a given deposit is protected and up to what limit.
• Tarion deposit cap: Tarion's deposit-protection payout is capped and the cap differs freehold vs. condo. Deposits above the protected maximum may rely on the trust arrangement and the builder's solvency — flag this to buyers on high-value units.
• Never advise a buyer that deposits are "fully safe" without checking both the Condominium Act trust treatment and the Tarion cap for that specific deal.

Interim Occupancy (Condominiums)

New condominium buyers usually move in before the building is registered as a condominium corporation — this gap is interim occupancy.

• During interim occupancy the buyer occupies the unit but does not yet own it (title cannot transfer until the condo is registered). The buyer pays the builder a monthly occupancy fee (sometimes called "phantom rent" because it builds no equity).
• The occupancy fee is roughly the sum of: (1) interest on the unpaid balance of the purchase price (at a prescribed rate), (2) an estimate of municipal taxes attributable to the unit, and (3) the projected common expenses (condo fees) for the unit.
• Interim occupancy can last months (occasionally a year or more) on large projects. Buyers should budget for occupancy fees that pay down no principal.
• Final closing / registration happens when the corporation is registered; only then does title transfer, the mortgage funds and registers, and land transfer tax and final adjustments become due.

Occupancy, Closing, and Builder Adjustments

The single biggest "surprise" complaint in new builds is closing adjustments and extra costs the buyer did not budget for. On a builder agreement, the stated purchase price is frequently not the all-in cost at closing. Common builder adjustments / extras (which can total many thousands of dollars) include:

• Development / education / municipal levies and increases passed on to the buyer (unless capped in the agreement — always try to negotiate a cap on development charges/levies).
• Tarion enrolment fee, utility/meter connection or hook-up charges (hydro, gas, water), and utility security deposits.
• Law Society / title / registration fees the builder charges, and HST on extras and upgrades.
• Occupancy fee true-ups and per-diem interest.
• Assignment / lease-during-occupancy fees, and administrative fees for changes.

Because these adjustments are one-sided (drafted by the builder's lawyer), the buyer's lawyer should review the agreement before the cooling-off period ends and negotiate caps and deletions where possible. Land transfer tax, ordinary buyer legal fees, and title insurance still apply on top, as with any purchase (see the land-transfer-tax and closing-process references).

Assignment Sales

An assignment is the sale of the buyer's contractual rights under a preconstruction (or not-yet-closed) purchase agreement to a new buyer (the assignee) before the deal closes and title transfers. The original buyer (assignor) does not sell a house — they sell the paper: the right to complete the builder's deal.

• It is not a normal resale. There is no title, no MLS status certificate transfer, and often no MLS listing at all — many builder agreements restrict or prohibit advertising the assignment (see marketing risks below).
• Builder consent is almost always required. Most builder agreements make assignment conditional on the builder's written consent, and builders commonly charge a substantial assignment fee (can be thousands to tens of thousands of dollars) and may impose conditions or refuse.
• What the assignee is buying: the assignor's position — the right to close and the deposits already paid — usually at the original price plus a negotiated "lift" (the assignor's profit). The assignee typically reimburses the deposits and pays the lift; they then complete the builder's closing themselves at the original contract price.
• Documentation: assignments use a separate assignment agreement (OREA has an assignment form for condos; builders often require their own). Confirm the builder's consent, fee, and any restriction in writing before marketing or signing.
• Two potential closings / dates: the assignment closing (assignor → assignee) and the final builder closing (builder → assignee). Track both.

HST and income-tax exposure on assignments (flag, don't advise)

Assignments are a tax minefield — realtors must flag, and refer to an accountant/lawyer, not opine:

• GST/HST on the assignment fee/lift: since May 7, 2022, assignment sales of new or substantially renovated residential housing are generally taxable for GST/HST — GST/HST typically applies to the assignment consideration (including, in many cases, the portion attributable to the deposit). See CRA GST/HST Notice 323. The assignor may be required to collect and remit HST on the assignment.
• Income vs. capital treatment: the CRA often treats an assignment "flip" profit as business income (100% taxable), not a capital gain. Combined with the federal "flipping" rules (property held under 12 months generally deemed business income), the assignor's profit can be fully taxable.
• New Housing Rebate risk: flipping/assigning can disqualify the buyer from the GST/HST New Housing Rebate if they never intended to occupy (see below).
• Always tell an assignor/assignee to get written tax advice before signing — the numbers in the deal can swing by tens of thousands once HST and income tax are applied.

HST and the New Housing Rebate (Basics)

New homes from a builder are subject to GST/HST; resale homes generally are not. The mechanics matter to how the price is quoted.

• Price usually quoted "HST included." Most Ontario builder agreements state a price that is inclusive of HST net of the rebate, on the assumption the buyer qualifies for the New Housing Rebate and assigns it to the builder. If the buyer does not qualify, the builder can require the buyer to pay the rebate amount back at closing (a nasty surprise — often on the order of tens of thousands of dollars). Read the HST clause carefully.
• GST/HST New Housing Rebate (owner-occupied): available where the buyer (or a close relation) buys the new home to use as their primary place of residence. It has a federal portion and an Ontario portion, each with its own formula and maximum (the Ontario portion is capped at a set dollar amount regardless of price). See CRA GI-120.
• New Residential Rental Property Rebate (NRRPR): an investor who rents the unit out to a tenant (long-term) may instead claim the NRRPR — but generally must pay the full HST at closing first and apply to the CRA afterward (they cannot assign it to the builder). This is a major cash-flow difference for buyers who plan to rent, and a frequent source of "why do I owe the builder $24,000 at closing?" complaints.
• Occupancy intent is everything: the owner-occupied rebate requires genuine intent to occupy; assigning or flipping before occupying can claw the rebate back.
• Enhanced/temporary measures: Ontario and the federal government have announced time-limited enhanced HST relief for new homes (e.g., relief around 2026–2027 and a federal first-time-buyer GST measure) — these are date- and eligibility-specific. Confirm current thresholds, maxima, and any enhanced rebate at canada.ca and the Ontario Ministry of Finance before quoting any figure.

Marketing and Representation Risks (TRESA)

New construction and assignments carry representation and advertising traps that get realtors disciplined by RECO:

• Advertising restrictions in the builder agreement / assignment ban. Many builder agreements prohibit the assignor from publicly advertising the assignment (including on MLS/social media). Marketing an assignment in breach of the contract can expose the assignor to default and forfeiture and the realtor to liability. Confirm the builder permits advertising, in writing, before listing.
• Whose agent are you? In a builder's sales-office/decor-centre, the on-site rep works for the builder, not the buyer. A buyer who walks in unrepresented may sign without independent advice. Encourage buyers to bring their own agent on the first visit — many builders require the buyer's agent to be registered/present at the first visit to be recognized for commission, so register early.
• Don't misdescribe status. In advertising, be accurate that a home is preconstruction / to-be-built / under construction and about occupancy vs. final closing timing — TRESA and RECO advertising standards require accuracy and no false/misleading impressions (see the advertising-and-mls-standards reference).
• Renderings vs. reality. Marketing renderings, model-suite finishes, and floor plans are often subject to change under the builder's agreement (the builder reserves broad substitution rights). Don't represent upgrades/finishes as guaranteed — point buyers to the agreement's specifications and substitution clauses.
• Deposit safety claims. Don't tell buyers deposits are "guaranteed safe" without checking the Tarion cap and Condominium Act trust treatment for that deal.
• Tax silence is dangerous. Do not give HST/rebate/assignment tax advice. State the exposure exists and refer to a lawyer/accountant in writing.

Preconstruction / New-Build Workflow Checklist (Realtors)

1. Verify the builder's HCRA licence in the Ontario Builder Directory (hcraontario.ca); review conditions, convictions, and complaint history.
2. Register your buyer with the builder's sales office on/before the first visit (to protect representation and commission).
3. Obtain and read the full builder agreement, Tarion Addendum, and (condo) disclosure statement.
4. Get everything to the buyer's real estate lawyer immediately — for a preconstruction condo, ensure review happens inside the 10-day cooling-off period.
5. Negotiate caps on development charges/levies and try to delete or cap builder adjustments/extras; identify the HST clause and confirm rebate assumption matches the buyer's intent (occupy vs. rent).
6. Confirm the deposit schedule and how deposits are protected (Condominium Act trust + Tarion cap).
7. For a condo, explain interim occupancy, occupancy fees, and the gap to registration/final closing.
8. Attend the Pre-Delivery Inspection (PDI); document defects; diarize Tarion 30-day and year-end (11–12 month) warranty submission windows and the 7-year MSD window.
9. For an assignment: confirm builder consent + fee + advertising restriction in writing first; use the correct assignment agreement; refer the client for written HST/income-tax advice; track both closings.
10. Keep the buyer's budget realistic: price + HST/rebate risk + closing adjustments + LTT + legal + occupancy fees.

Key Buyer Questions to Prompt

• Is the builder's HCRA licence active, and what's their track record in the directory?
• For a condo: when exactly does my 10-day cooling-off period start and end, and is my lawyer reviewing the disclosure statement inside it?
• What is the full deposit schedule, and how are my deposits protected (trust + Tarion cap)?
• What builder adjustments/extras can be charged at closing, and can we cap development charges/levies?
• Is the price HST-included, and does it assume I'll occupy the home? What happens to the rebate if I rent it out or assign it?
• For a condo: how long is interim occupancy likely, and what will the occupancy fee cost me per month?
• What are the Tarion warranty stages, and what are my PDI and claim-filing deadlines?
• (Assignment) Does the builder consent, what's the fee, can it even be advertised, and have I gotten tax advice?

Red Flags

• Builder not found / not active in the HCRA Ontario Builder Directory.
• Pressure to sign a preconstruction condo without the disclosure statement or without using the 10-day cooling-off window.
• Deposit schedule with large amounts above the Tarion protected cap and unclear trust protection.
• HST clause that quietly makes the buyer repay the rebate if they don't occupy — on a buyer who plans to rent (should be looking at NRRPR, full HST at closing).
• Uncapped development charges/levies and open-ended builder adjustment clauses.
• An assignment being marketed with no written builder consent or in breach of an advertising ban.
• Assignor treating the flip profit as a tax-free capital gain with no accountant — likely business income + HST on the assignment.
• Buyer walking a builder's sales office unrepresented and signing on the spot.
• Marketing that presents renderings/finishes as guaranteed or blurs occupancy vs. final closing dates.

Assistant Guardrails

• Not legal, tax, or warranty advice. This reference orients the realtor; substantive questions go to a real estate lawyer, an accountant, Tarion, or the HCRA.
• Never quote a specific dollar figure from memory — deposit caps, warranty limits, rebate maxima, and cooling-off length are statutory/regulatory and change. Route the user to tarion.com, hcraontario.ca, ontario.ca/e-Laws, and canada.ca to confirm the current number.
• Distinguish the products: the 10-day cooling-off applies to preconstruction condos only, not resale condos and not freehold. Interim occupancy is a condo concept. Don't cross-apply them.
• Assignment + tax = refer out, in writing. Always flag the GST/HST Notice 323 treatment and possible business-income characterization, and tell the client to get written professional advice before signing.
• Builder agreements are not OREA forms — do not assume standard OREA clauses/protections apply; the Tarion Addendum governs critical dates.
• Encourage buyers to be represented from the first sales-office visit and to have a lawyer review before the cooling-off period expires.
• When unsure, say so and point to the primary source rather than guessing.

Sources (accessed 2026-07-16)

• Tarion — statutory warranty, deposit protection, delayed closing/occupancy, Addendum, warranty stages: https://www.tarion.com
• Home Construction Regulatory Authority (HCRA) — builder licensing, Code of Ethics, Ontario Builder Directory: https://www.hcraontario.ca and https://obd.hcraontario.ca
• Ontario New Home Warranties Plan Act (via e-Laws): https://www.ontario.ca/laws/statute/90o31
• Condominium Act, 1998 — 10-day cooling-off/rescission, disclosure statement, deposit trust, interim occupancy (via e-Laws): https://www.ontario.ca/laws/statute/98c19
• CRA — GST/HST New Housing Rebate & guide GI-120: https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/rc4028.html and https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/gi-120.html
• CRA — GST/HST Notice 323 (assignment sales of new housing, effective May 7, 2022): https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/notice323.html
• CRA — New Residential Rental Property Rebate (NRRPR): https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/rc4231.html
• CRA — residential property "flipping" rules (12-month deemed business income): https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/federal-government-budgets/residential-property-flipping-rule.html
• Ontario Ministry of Finance — Land Transfer Tax and provincial HST measures: https://www.ontario.ca/page/land-transfer-tax
• RECO / TRESA — representation, advertising standards, consumer information: https://www.reco.on.ca
• OREA — standard forms (incl. condo assignment forms): https://www.orea.com/standard-forms-clauses

Reference text, not legal, tax, or construction-warranty advice. Deposit caps, warranty limits, cooling-off periods, adjustments, and HST/rebate figures are governed by the Ontario New Home Warranties Plan Act, the Condominium Act, 1998, HCRA regulation, and CRA rules, and change over time — verify current requirements at tarion.com, hcraontario.ca, ontario.ca/e-Laws, and canada.ca, and confirm all agreement and tax specifics with a licensed Ontario real estate lawyer and an accountant.