Why A Lawyer Should Review Your Agreement of Purchase and Sale When Purchasing a New Condo
Nov 07

Why A Lawyer Should Review Your Agreement of Purchase and Sale When Purchasing a New Condo

In Toronto’s hot condo market, purchasers often feel rushed into purchasing pre-construction condominiums off the plans before the product disappears. It is okay to sign the Agreement of Purchase and Sale in order to secure the unit you may want. HOWEVER, as soon as you put pen to paper, the deal is not firm! Thank goodness for that! Under the Condominium Act, in Ontario a purchaser has 10 days to reconsider the deal, and receive a full refund of their initial deposit, as if it never happened. This is commonly referred to as the “10-day Cooling Off Period”.

Purchaser’s should be taking full advantage of the 10-Day Cooling Off Period. It was implemented by the legislation to protect purchasers from making a huge financial commitment without thinking it through. Bringing the Agreement of Purchase and Sale to a lawyer for review can be extremely beneficial. There are often many “hidden” fees in the Agreement that a purchaser may not have anticipated. A lawyer will be able to spot these fees, and assist a purchaser in negotiating with the builder during the cooling-off period to either eliminate or in some cases insert maximum caps on some of these fees.

In many cases, the few hundred dollars you may spend on a lawyer’s review could translate to thousands of dollars in savings on the final closing date. Too often do we speak with friends that face unanticipated closing costs as they were either not informed of the 10-Day Cooling Off Period, or simply did not take the time to bring their Agreement to a lawyer.

We have created a list of only a few of the many items often overlooked by a purchaser who did not have a lawyer review their Agreement upon signing:

1. HST Implications:

Many people are purchasing condominiums as investment properties to be leased to tenants immediately after closing. What purchaser’s may not realize is that it is common practice for builder’s to list the purchase price under the assumption that, a) the purchaser qualifies for the New Home HST Rebate, and b) that the purchaser is agreeing to assign the rebate to the builder on closing. However, if the purchaser does not qualify for this rebate, as they do not plan on moving in on closing, the purchaser may be contractually obligated to pay the full HST in addition to the purchase price on closing. This can mean tens of thousands of dollars payable on closing that a purchaser did not anticipate!

2. Development Charges and Municipal Levies:

In every municipality, there are a host of municipal development charges and levies that are payable by the builder. Year after year, these fees are subject to increase. As such, builders try to pass on the incremental costs of these municipal charges to the purchasers. These fees are often unpredictable and can be quite substantial. If the Agreement of Purchase and Sale is negotiated properly by a lawyer, these fees may be reduced, capped at predictable amounts, or in some cases eliminated entirely.

3. Other Builder Adjustments:

In addition to Development Charges and Municipal Levies, there is a host of other builder adjustments that are payable on closing. These may include items such as: Tarion enrollment fees, deposit fees and/or penalties, utility connection fees, etc.

4. Reserve Fund Contribution:

Every condominium corporation must maintain a healthy reserve fund that is used for a variety of different capital expenditures that the building may require. In order to set a solid foundation for the reserve fund at the establishment of the condo, each unit owner is obligated to pay into it on closing. If a purchaser is not aware of this, it could mean thousands of dollars in unanticipated closing costs. A lawyer will be able to point this out to a purchaser during an Agreement of Purchase and Sale review.

5. Assignment Clauses:

In some circumstances when purchasers are looking to by a condominium on speculation, they may be looking to assign the Agreement of Purchase and Sale for a profit to a third party before the final closing date. Many Agreements prohibit this type of transaction, or require builder approval. If a purchaser is expecting to assign the deal, they would want their lawyer to ensure that the Agreement allows them to follow through with an assignment as planned.

6. Interim Occupancy Fees:

For most new-build condominium projects in the Greater Toronto Area, there are two closing dates: The Interim Occupancy Closing Date and the Final Closing Date (also known as the Unit Transfer Date). An Interim Occupancy Closing occurs when the builder has received permission from the municipality allowing for the unit to be safely occupied by a purchaser. However, at this stage, the condominium likely has not been registered which means that the units do not yet have individual Property Identification Numbers, and title cannot yet be taken in the purchaser’s name. There will therefore be a period of time where the purchaser may live in the unit, but has not yet been transferred ownership. During the period of time between the Interim Occupancy Closing and the Final Closing, the purchaser must still pay a monthly occupancy fee to the builder, and is effectively renting their own unit. Sometimes purchasers are not aware of this system and their lawyer would be able to bring these items up during an Agreement of Purchase and Sale review.

7. Land Transfer Tax:

Although many purchasers are aware of Land Transfer Tax implications, if they are not aware, this can mean thousands of dollars in unanticipated closing costs. Land Transfer Tax can also vary drastically from municipality to municipality. For example, a property purchase in Toronto can trigger roughly double the Land Transfer Tax of a purchase in Mississauga! A lawyer would be able to provide a purchaser with a cost estimate, making them fully informed of what to expect on closing. A lawyer will also be able to inform a purchaser if they qualify for any government Land Transfer Tax rebates.


It is always a good idea to have a lawyer review an Agreement of Purchase and Sale during the 10-Day Cooling Off Period when purchasing a pre-construction condominium.

It is often the case that by spending a few hundred dollars on a lawyer when reviewing your Agreement of Purchase and Sale, your lawyer could potentially save you thousands in closing costs.

At a bare minimum, your lawyer will be able shed light on the costs that you can anticipate on closing so that you are kept informed well in advance, allowing you to arrange your finances appropriately.

These comments are of a general nature and not intended to provide legal advice as individual situations will differ and should be discussed with a lawyer.

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