Pre-Construction Condo Closing Costs: What Builders Do Not Tell You

Purchasing a pre-construction condo in the Greater Toronto Area is one of the most significant financial decisions a Canadian will ever make. The glossy brochures, sleek model suites, and attractive deposit structures make the process feel exciting and straightforward. However, seasoned buyers and real estate professionals know that the purchase price printed on your agreement of purchase and sale is rarely the final number you will pay. Pre construction closing costs can add tens of thousands of dollars to your total expenditure, and many builders are not forthcoming about these fees until you are already committed to the deal.

This comprehensive guide is designed to pull back the curtain on new build closing costs Ontario buyers face, walking you through every fee category, explaining why each one exists, and offering practical strategies to minimise your financial exposure. Whether you are purchasing your first condo or adding to an investment portfolio, understanding preconstruction condo fees before you sign is the single most powerful step you can take to protect your financial future.

According to the Building Industry and Land Development Association (BILD), over 20,000 new condominium units were sold in the GTA in 2023 alone. A significant percentage of those buyers were caught off guard by closing costs that exceeded their original budget by 3% to 5% of the purchase price — sometimes more. On a $700,000 condo, that can translate to an unexpected shortfall of $21,000 to $35,000 or more.

Why Closing Costs on Pre-Construction Condos Are Different

Most homebuyers are familiar with the general concept of closing costs associated with resale properties. However, pre-construction condos operate under an entirely different framework governed by the Ontario New Home Warranties Plan Act and the Condominium Act, 1998. The result is a layered set of charges that have no equivalent in the resale market.

The fundamental reason pre construction closing costs are higher and more complex than resale closing costs is that you are not simply buying an existing asset. You are funding the completion of a building, navigating the registration of a brand-new condominium corporation, and absorbing fees that municipalities and provincial bodies charge developers — fees that builders routinely pass directly to purchasers through their agreements.

You can explore available pre-construction opportunities across the GTA on our Discover page, where listings include disclosure statements that will give you an early look at the fee structures builders use.

The Two Closing Dates You Need to Understand

One of the most confusing aspects of buying a new build condo in Ontario is that there are typically two separate closing dates, and costs are incurred at both of them.

Interim Occupancy Closing

The first closing occurs when your suite is ready for you to move in, but the building as a whole has not yet been registered as a condominium corporation. During this period — which can last anywhere from a few months to over two years — you occupy your unit but do not legally own it. You pay the builder an "interim occupancy fee" each month, which consists of three components: interest on the unpaid balance of the purchase price (calculated at the rate prescribed under the Condominium Act, which is based on the Bank of Canada's posted mortgage rate), an estimate of property taxes, and an estimate of maintenance fees. These payments are not applied to your mortgage principal. They are essentially rent paid to the builder.

Final Closing (Registration)

The second closing occurs when the condominium is officially registered with the land registry office. This is the date when title transfers to you, your mortgage funds, and the bulk of the closing costs become payable. Understanding both dates is essential when planning your cash flow, because the financial demands of each can arrive months or years apart.

A Complete Breakdown of Pre-Construction Closing Costs in Ontario

The following table summarises the major categories of pre construction closing costs that Ontario buyers typically encounter. Note that actual figures vary by builder, municipality, and unit size.

Cost Category	Typical Range	Who Charges It	Negotiable?
Development Charges	$10,000 – $50,000+	Municipality (passed through builder)	Rarely
Ontario Land Transfer Tax	0.5% – 2.5% of purchase price	Province of Ontario	No
Toronto Land Transfer Tax	0.5% – 2.5% of purchase price	City of Toronto	No
HST on Purchase Price	13% (less new housing rebate)	Canada Revenue Agency	No
Tarion Warranty Enrolment Fee	$1,000 – $2,800+	Tarion (passed through builder)	No
Legal Fees (Builder's Lawyer)	$1,500 – $3,000	Builder	Sometimes
Legal Fees (Your Lawyer)	$1,800 – $3,500	Your solicitor	Yes
Utility Connection Charges	$2,000 – $7,500	Builder / Utility companies	Rarely
Development Levies / Section 37	$500 – $10,000+	Municipality (passed through builder)	No
Common Element Contribution	2 months' maintenance fees	Condominium Corporation	No
Reserve Fund Contribution	Varies; often $3,000 – $8,000	Condominium Corporation	No
Title Insurance	$250 – $500	Title insurance provider	Minimal
Mortgage Registration Fee	$75 – $150	Province of Ontario	No
Status Certificate Review	$200 – $500	Your solicitor	Yes

For a detailed walkthrough of the land transfer tax calculations specifically, refer to our dedicated Ontario Land Transfer Tax Guide 2026, which includes worked examples for various purchase price brackets.

Development Charges: The Hidden Giant

Development charges (DCs) are, without question, the most significant and least understood component of new build closing costs in Ontario. These are fees that municipalities levy on new developments to fund the infrastructure required to support growth — roads, transit, schools, water and sewage systems, libraries, and parks.

Under Ontario's Development Charges Act, 1997, municipalities are permitted to pass these charges on to new homebuyers. Builders almost universally include a clause in their agreements of purchase and sale that allows them to pass through any increase in development charges between the time the agreement was signed and the date of closing. This is not a mistake or an oversight. It is a deliberate contractual mechanism, and it can expose buyers to costs they never anticipated.

As of 2024, City of Toronto development charges for a new condominium apartment were approximately $36,000 to $48,000 per unit, depending on unit size. In the surrounding 905 municipalities, these figures vary significantly:

Municipality	Approximate DC Per Condo Unit (2024)
City of Toronto	$36,000 – $48,000
Mississauga	$28,000 – $38,000
Brampton	$30,000 – $42,000
Markham	$25,000 – $35,000
Vaughan	$27,000 – $37,000
Oakville	$32,000 – $44,000

Crucially, buyers should check whether their agreement of purchase and sale contains a development charge cap — a maximum amount the builder can pass through regardless of what municipalities charge at closing. Some builders offer a cap as an incentive; others do not. Always ask before you sign, and have a qualified real estate lawyer review this clause in particular.

HST on New Construction: What the Rebate Actually Covers

New residential construction in Canada is subject to 13% Harmonised Sales Tax (HST). On a $700,000 condo, that represents $91,000 in tax — a number that would make any buyer faint. The good news is that the federal government and the Province of Ontario both offer partial rebates that significantly reduce this burden.

The federal HST New Housing Rebate allows buyers to recover up to 36% of the federal portion (5%) of HST paid, to a maximum rebate of $6,300, for homes priced up to $350,000. For homes priced between $350,000 and $450,000, the rebate is phased out. For homes priced above $450,000, there is no federal rebate on the purchase price itself.

Ontario's provincial component offers a rebate of 75% of the provincial portion (8%) of HST, up to a maximum of $24,000, with no income or price phase-out for owner-occupied purchases.

Here is the critical distinction that catches many investors off guard: the HST rebate is only automatically available to buyers who intend to use the property as their primary residence or the primary residence of a qualifying relative. Investors who intend to rent out their unit must assign the rebate to the builder at closing and then claim the New Residential Rental Property Rebate directly from the Canada Revenue Agency. Failing to handle this correctly can result in the full 13% HST becoming payable — an enormous unexpected cost.

Most builder agreements include the HST in the stated purchase price, conditional on the buyer assigning the rebate. If you are buying as an investor and you do not qualify for the rebate, or if you handle the rebate incorrectly, you may owe the builder the full unrebated HST amount at closing. For a $700,000 unit, that could mean an additional $24,000 to $30,200 over and above what you budgeted.

Land Transfer Tax: A Double Charge in Toronto

Ontario's land transfer tax applies to all property purchases in the province and is calculated on a sliding scale based on purchase price. For a $700,000 condo, the Ontario land transfer tax would be approximately $9,475. If you are purchasing within the City of Toronto, you also pay a municipal land transfer tax of an identical amount — bringing the combined land transfer tax bill to approximately $18,950.

First-time homebuyers may be eligible for a rebate of up to $4,000 on the provincial land transfer tax and up to $4,475 on the Toronto municipal land transfer tax, potentially saving up to $8,475. However, strict eligibility criteria apply, including never having owned a home anywhere in the world.

For the full calculation methodology and 2026 rate schedules, review our Toronto Closing Costs Breakdown 2026 guide, which includes worked examples across multiple price points.

You can also browse Toronto pre-construction homes on our platform to compare projects across different neighbourhoods and understand how purchase price — and therefore land transfer tax — varies by location.

Tarion Warranty Programme Fees

Every new home built in Ontario must be enrolled with Tarion (formerly the Tarion Warranty Corporation, now operating under the Home Construction Regulatory Authority). Tarion provides statutory warranty protection covering:

• 1-year warranty on workmanship and materials
• 2-year warranty on electrical, plumbing, heating systems, and building envelope
• 7-year warranty on major structural defects

The enrolment fee is paid by the builder but passed through to the buyer at closing. As of 2024, the Tarion enrolment fee for a condo priced at $700,000 is approximately $1,690. For condos priced at $1,000,000, the fee rises to approximately $2,190. These figures are set by regulation and are not negotiable.

The Common Element and Reserve Fund Contributions

When a condominium corporation is first registered, it requires initial capitalisation to cover administrative setup costs and to begin building its reserve fund. Buyers at the initial closing are typically required to contribute:

• Common Element Contribution: Usually equivalent to two months of estimated common element maintenance fees. If your estimated monthly fee is $650, this contribution would be $1,300.
• Reserve Fund Contribution: A one-time contribution to the building's reserve fund, which covers long-term capital expenditures such as roof replacements, elevator refurbishments, and parking garage repairs. This figure is established in the condominium's initial reserve fund study and can range from $3,000 to over $8,000.

These contributions are non-negotiable and are mandated under the Condominium Act, 1998. They represent real money paid at closing that buyers rarely budget for.

Utility Connection and Bulk Services Charges

Modern high-rise condominiums increasingly rely on shared utility infrastructure, including bulk internet, cable, geothermal heating and cooling systems, and in some cases, private water and wastewater systems. Builders often charge connection fees for these systems at closing, and they may also impose ongoing obligations through long-term contracts with utility providers — contracts that the buyer inherits.

These utility connection fees can range from $2,000 to $7,500 or more and are rarely highlighted in sales presentations. Additionally, some builders require buyers to assume rental agreements for equipment such as hot water tanks, mechanical air conditioning units, or smart home systems. These rental obligations can cost $30 to $150 per month and may have terms of 10 years or longer, with early termination penalties.

Legal Fees: Yours and the Builder's

Pre-construction purchases involve two sets of legal fees. Your own solicitor's fees for reviewing the agreement of purchase and sale, attending to the closing, and registering title typically range from $1,800 to $3,500, depending on complexity. This is non-negotiable in the sense that you should never attempt to close a pre-construction purchase without independent legal counsel — the risks are simply too great.

What surprises many buyers is the second set of legal fees: the builder's own legal costs for preparing the closing documents. Many builders charge these fees to the buyer at closing, typically in the range of $1,500 to $3,000. This is disclosed in the agreement of purchase and sale, but buyers frequently overlook it or assume the figure will be negligible.

What a Realistic Closing Cost Scenario Looks Like

To illustrate how all of these preconstruction condo fees accumulate, consider a hypothetical example: a 600-square-foot one-bedroom-plus-den unit in a Toronto mid-rise development, purchased for $699,000.

Cost Item	Estimated Amount
Ontario Land Transfer Tax	$9,475
Toronto Municipal Land Transfer Tax	$9,475
Development Charges (net of any cap)	$14,000
HST Shortfall (investor scenario)	$0 (assuming owner-occupied rebate assigned)
Tarion Enrolment Fee	$1,690
Reserve Fund Contribution	$4,500
Common Element Contribution (2 months)	$1,300
Utility Connection Charges	$3,500
Builder's Legal Fees	$2,000
Your Legal Fees	$2,500
Title Insurance	$350
Miscellaneous Adjustments	$1,500
Total Estimated Closing Costs	$50,290

That total of approximately $50,290 represents roughly 7.2% of the $699,000 purchase price — funds that must be available in cash at closing, separate from your deposit and your mortgage down payment. This figure does not include moving costs, immediate renovation or furnishing expenses, or the cost of mortgage default insurance (CMHC premiums) if your down payment is less than 20%.

Strategies to Reduce Your Closing Cost Exposure

Negotiate a Development Charge Cap

One of the most effective ways to reduce your exposure to rising new build closing costs in Ontario is to negotiate a development charge cap before you sign. Ask the builder to cap the development charges at the rate in effect on the date your agreement is signed. Some builders — particularly in a slower sales environment — will agree to this. Others will not, but it is always worth asking.

Hire an Experienced Real Estate Lawyer Early

Many buyers hire a lawyer only when it is time to close, but the ideal time to engage legal counsel is before you sign the agreement of purchase and sale. Ontario's Condominium Act provides a 10-day cooling-off period for pre-construction purchases — 10 calendar days from the date you receive the signed agreement and all required disclosure documents. Use this window to have a lawyer review every clause, including the fee schedule, the development charge pass-through provisions, and the utility contract obligations.

Understand the HST Structure Completely

If you are purchasing as an investor, consult an accountant who specialises in real estate before you sign. The difference between correctly and incorrectly handling the HST rebate can be $24,000 or more. Ensure your agreement clearly addresses how HST will be handled and what your obligations are at closing.

Review the Disclosure Statement Carefully

Under the Condominium Act, builders must provide a disclosure statement that outlines all known fees and charges. This document can be dense and technical, but it is the single most important source of information about what you will owe. Pay particular attention to Schedule B (the statement of critical dates) and any schedules that detail adjustment amounts.

Budget Conservatively

Real estate professionals with experience in the pre-construction market typically advise buyers to budget an additional 5% to 7% of the purchase price — beyond the deposit — to cover closing costs. For a $700,000 purchase, that means setting aside $35,000 to $49,000 in accessible cash. Buyers who do not do this risk being unable to close, which can result in losing their entire deposit and facing legal action from the builder.

Interim Occupancy Fees: The Invisible Cost

No discussion of pre construction closing costs is complete without addressing interim occupancy fees in greater detail. During the occupancy period, you are paying monthly amounts that build no equity. In a building with a lengthy registration timeline — some Toronto high-rises have had occupancy periods lasting 18 to 24 months — the cumulative cost can be staggering.

Consider a unit with a remaining balance of $559,200 (after a 20% deposit on a $699,000 purchase). At an annual interest rate of 7% (used here for illustration), the monthly interest component alone would be approximately $3,262. Add estimated property taxes of $300 per month and estimated maintenance fees of $600 per month, and your monthly interim occupancy fee would be approximately $4,162. Over 18 months, that amounts to $74,916 — paid entirely to the builder with no principal reduction.

This is not a closing cost in the traditional sense, but it is a very real financial obligation that many buyers fail to account for in their pre-purchase analysis.

Common Mistakes GTA Buyers Make

Drawing on patterns observed across the pre-construction market, the following mistakes consistently result in financial hardship at closing:

• Assuming the purchase price is the total cost: It never is. Budget an additional 5% to 7% minimum.
• Ignoring the cooling-off period: Ten days is not a long time, but it is enough to have a lawyer review your agreement and identify red flags.
• Failing to plan for a delayed closing: Builders routinely delay occupancy dates. Your mortgage rate lock-in, job relocation plans, and lease-end dates must all account for this possibility.
• Not reading the utility contracts: Long-term mandatory rental agreements for mechanical systems can cost thousands of dollars over their term.
• Underestimating the investor HST obligation: This single error can cost $24,000 or more.
• Treating preconstruction condo fees as approximate: Budget for the high end of every range. Fees rarely come in below estimates; they frequently exceed them.

How Maintenance Fees Evolve After Closing

One final area where builders are frequently less than transparent involves the trajectory of monthly maintenance fees after closing. Builders are required to provide an estimated budget for the first year of condominium operations, but these estimates are consistently understated. Studies and industry analyses have shown that maintenance fees in new Toronto condominiums increase by an average of 3% to 5% per year in the first five years as the building settles into its actual operating costs and as the reserve fund is properly capitalised.

Furthermore, the first reserve fund study — conducted within the first year of operation — often reveals that the initial reserve fund is underfunded, leading to special assessments or sharp fee increases. Buyers of pre-construction condos should treat the stated monthly maintenance fee as a floor, not a ceiling, and plan accordingly.

Frequently Asked Questions

What is the average total closing cost for a pre-construction condo in Toronto?

For a Toronto pre-construction condo priced between $600,000 and $800,000, total closing costs typically range from 5% to 8% of the purchase price, or approximately $30,000 to $64,000. This range includes land transfer taxes (both provincial and municipal), development charges, HST adjustments, Tarion fees, legal fees, and condominium corporation contributions. The exact figure depends on your specific agreement, whether you are a first-time buyer eligible for land transfer tax rebates, and whether you are purchasing as an owner-occupant or investor.

Can I include closing costs in my mortgage?

In Canada, closing costs generally cannot be financed through your primary mortgage. Your lender will advance the mortgage funds against the purchase price of the property, but the additional closing costs must be paid from your own resources at the time of closing. Some buyers use home equity lines of credit, personal savings, or unsecured financing to bridge this gap, but these strategies carry their own risks and costs. It is essential to have sufficient liquid funds available well before your closing date.

What happens if I cannot afford the closing costs when the final closing comes?

Failing to close on a pre-construction condo purchase is an extremely serious situation. If you are unable to complete the purchase, the builder has the right to rescind the agreement and keep your deposit — which on a $700,000 unit could be $35,000 to $70,000 or more. The builder may also pursue legal action for any losses suffered as a result of your failure to close, including the difference between your purchase price and any lower price they achieve on a subsequent sale. This is not a theoretical risk; it has affected hundreds of GTA buyers, particularly during periods of rapid interest rate increases.

Are development charges the same across all Ontario municipalities?

No. Development charges vary significantly across Ontario municipalities and are set by each individual local government under the Development Charges Act, 1997. Toronto's charges are among the highest in the province, while smaller municipalities outside the GTA typically charge considerably less. Additionally, development charges change over time as municipalities update their background studies. Because pre-construction purchases close years after the agreement is signed, buyers face the risk of increased charges unless their agreement contains a cap. Always verify the development charges applicable to your specific project and municipality before signing.

Is HST included in the advertised purchase price of a pre-construction condo?

It depends on the builder and the specific agreement. Many builders advertise purchase prices that are "inclusive of HST, net of applicable rebates," meaning the price assumes the buyer will qualify for and assign the residential rebate to the builder at closing. If you do not qualify for the rebate — most commonly because you are purchasing as an investor who will not occupy the unit — you may owe the builder the full unrebated HST at closing. This must be clarified before you sign, and investors should always consult a tax professional to understand their obligations under the New Residential Rental Property Rebate programme.

How long is the typical interim occupancy period in Toronto?

The interim occupancy period in Toronto high-rise condominiums can vary considerably, but periods of 6 to 24 months are common. Some complex or large-scale projects have seen interim occupancy periods extend beyond 24 months. During this entire period, buyers pay monthly interim occupancy fees to the builder without accumulating any mortgage equity. The Ontario government does not set a maximum duration for the interim occupancy period, which means buyers in tall buildings — where floors are registered sequentially — may face longer waits than anticipated. Buyers should model their cash flow under both a best-case and a worst-case occupancy period scenario.

What is a status certificate and do I need to review it for a pre-construction purchase?

A status certificate is a document issued by a condominium corporation that discloses the financial health of the building, including the reserve fund balance, any outstanding special assessments, the current budget, and any known or pending litigation involving the corporation. For resale condominiums, reviewing the status certificate before finalising a purchase is standard practice. For pre-construction purchases, a status certificate does not exist at the time of signing because the condominium corporation has not yet been created. However, once the building is registered, your lawyer should conduct a thorough review of the condominium's disclosure documents and first-year budget as part of the closing process. If concerns arise during this review — such as an already-underfunded reserve fund — you should discuss your options with your solicitor promptly.