Pre-construction early termination (project cancellation)분양 계약 조기 종료 (프로젝트 취소)

What is it?

Buying pre-construction means buying a home before it is built. So there is always a risk that the builder decides not to build, or that the project cannot go ahead for some other reason. Tarion calls this a "cancelled" project.

When a project is cancelled, the builder usually tells buyers it intends to terminate (end) their purchase agreements. This page explains what happens then, and what happens to your deposit (the money you paid toward the price).

According to Tarion, the most common reasons are not reaching a minimum number of sales, not getting financing for construction, and not getting approvals from the municipality. Apart from these conditions, a project can also be cancelled because the builder goes bankrupt or becomes insolvent (cannot pay its debts).

What are Early Termination Conditions?

Every new home purchase agreement must have an Addendum, made by Tarion and the HCRA, attached to it. The Addendum has a section that explains any Early Termination Conditions in your deal. An Early Termination Condition says: if a certain approval or event does not happen by a set date, the agreement may end.

• Only the types of conditions listed in the Addendum are allowed. Conditions that are not allowed are not enforceable.
• Each condition must come with a date by which it will be satisfied. If it is not satisfied by that date, the agreement may be terminated.
• Each condition must be set out separately, say exactly what approval is needed, and name the approving authority.
• The builder must confirm to you if and when each condition is satisfied.
• If the Addendum conflicts with other terms in the agreement, the Addendum wins.

Which conditions are allowed?

Tarion says most allowed conditions are about the approvals needed to build the project and move people in. Here are the examples Tarion gives.

A condo agreement can also have "waivable conditions" that need no proof from an approving authority: sales passing a set amount by a set date, satisfactory project financing, and confirmation that the buyer has enough money to complete the deal.

Do you get time to review the conditions?

• Condo: under the Condominium Act you have a 10-day cooling-off period to cancel the agreement. Tarion advises you to review the Early Termination Conditions during this period.
• The first page of a condo agreement is the Condominium Information Sheet. It lists the main risks of buying a pre-construction condo, and Tarion points to Early Termination Conditions as an important risk to check.
• Freehold home: if the builder includes Early Termination Conditions, you get a 3 business day cooling-off period to review them and end the agreement if you are not satisfied. If project viability conditions are included, you get a 10-day review period.
• Tarion advises having your agreement reviewed by a lawyer experienced in pre-construction condo deals.

What happens to a condo deposit if the project is cancelled?

The builder cannot spend condo deposits freely. Under section 81 of the Condominium Act, a set type of trustee or the builder’s lawyer must receive the money and hold it in trust, and the builder must give you written proof of this within 10 days of your payment.

However, if the builder provides security set by law (an insurance policy or a Tarion deposit receipt), the money can be released from trust (s. 81(7)). Your money is then protected by that security instead of the trust.

Tarion says that if the builder terminates the agreement, it must refund your deposit in full within 10 days. If the agreement says money is returned on termination, the builder must also pay interest at the rate set by law on the money returned (s. 82(7)).

Interest rate: if no units in the project were sold before January 1, 2023 and the builder ends the agreement, the Bank of Canada policy interest rate is used. Otherwise it is 2% below the Bank of Canada bank rate (O. Reg. 48/01, ss. 19 and 19.1). The rate is reset every six months, based on the rate on March 31 and September 30.

Tarion protection and the HCRA

• Condo: if the builder does not return your deposit, Tarion protects it up to $20,000. Anything above that must be recovered from the trust account or the legal security above, so you will need a lawyer.
• Freehold home: for agreements signed on or after January 1, 2018, the limit is up to $60,000 if the price is $600,000 or less, and 10% of the price (maximum $100,000) above that. From April 1, 2026, you must register the purchase with Tarion within 45 days of signing to get the maximum coverage (the change to coverage amounts is deferred to January 1, 2027).
• Tarion protection applies if the builder goes bankrupt, the builder fundamentally breaches the agreement, or the buyer uses a legal right to cancel.
• Tarion has no power to force a builder to finish a project it decides to cancel. If you have a complaint about how the project was cancelled, you can report it to the HCRA (the body that licenses new home builders).
• The HCRA’s Ontario Builder Directory shows a builder’s licence status, past cancelled condo projects and more, so you can check before you buy.

It depends on who ends the deal and why

The official sources I checked do not say whether money paid for upgrades or extras also comes back with interest when the builder cancels the project. The Condominium Act leaves money for personal property that is not permanently attached to the land out of the trust rule (s. 81(2)). Check your own agreement with a lawyer.

What to do

1. Before you sign: read the Early Termination Conditions section of the Addendum and the Condominium Information Sheet. For each condition, check what it is, its date and the approving authority. Look up the builder’s history in the HCRA directory.
2. During the cooling-off period: have a lawyer with pre-construction experience review the agreement and conditions. If you are not comfortable, you can cancel during this period.
3. Every time you pay a deposit: keep the agreement, copies of your cancelled deposit cheques, bank records and the trust proof. Tarion asks for the agreement and cancelled deposit cheques when you claim.
4. Wait for confirmation: the builder must tell you whether each condition is satisfied. If the date passes and you hear nothing, ask through your lawyer.
5. If you get a termination notice: talk to a lawyer before treating the agreement as terminated (Tarion’s advice). For a condo, the deposit and interest should arrive within 10 days.
6. If the money does not come: call Tarion (1-877-982-7466) for a Deposit Refund Claim Form and send it in. A review can take up to 6 months, or longer if disputed. Confirm the claim deadline with Tarion. Report complaints about how the project was cancelled to the HCRA.

An example