In this challenging condominium market, there are thousands of buyers in pre-construction contracts which may not go ahead (see the example below). It is critical that they know their rights. When this happens, buyers often discover their legal remedies are far more limited than they expected. Here are three essential points you need to know:
1. You’re NOT Entitled to Compensation
Most pre-construction agreements allow the builder to cancel if it cannot arrange financing, obtain development approvals or meet a certain level of sales.
If the builder decides to cancel the project within the time frame set out in the Agreement, you’re generally not entitled to compensation beyond the return of your deposit. Market appreciation, legal fees, lost opportunities, moving cancellation costs, etc.—none of these are typically recoverable.
2. You’ll Typically ONLY Get Your Deposit Back
In most cases, your only remedy for cancellation is a refund of your deposit, possibly with some interest based on the agreement and the Condominium Act. This interest is quite limited and does not typically keep up with inflation. It is most likely that your deposit will be worth less than it was when you made it.
3. You CANNOT Force the Builder to Continue
You have no legal power to compel construction to proceed. It is also important to note that Tarion does not have authority to compel a vendor to complete a condominium project that they decide to cancel. However, if you have a complaint about the circumstances under which the project was cancelled, you may report these to the Home Construction Regulatory Authority (HCRA).
Practical Tips for Buyers:
- Research your builder’s track record thoroughly before signing.
- Monitor construction milestones and stay proactive—don’t assume all is well.
- Know your outside closing date and what rights it gives you.
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