When purchasing a pre-construction condo in Ontario, it’s crucial to understand the closing costs involved. While these expenses are typically due at the time of final closing — often three or four years after signing the initial agreement — factoring them into your budget from the outset will save you from future financial surprises.
Most closing costs are outlined in Schedule X of your purchase agreement and will appear in your Statement of Adjustments at closing. Here’s a comprehensive breakdown of the most common closing costs for pre-construction condos.
1. Development Levies and Municipal Charges
Development Charges
Municipalities impose development fees on builders to fund essential infrastructure like roads, sewage, and utilities. Developers pass these costs to buyers based on unit size.
Education Levies
To support the construction of new schools in growing communities, education levies are charged as part of the development process.
Section 37 Levies
When developers request additional building density or zoning changes, they often pay Section 37 levies to the municipality. These funds support community amenities like parks, recreation centers, and libraries.
Public Art Levies
Some developments include public art installations, funded by these levies, enhancing the cultural vibrancy of the neighborhood.
Parks Levies
To maintain and develop green spaces, municipalities charge parks levies on new developments.
Other Municipal Charges
This category covers various fees municipalities impose to support public infrastructure and urban growth.
2. Tarion Warranty Enrolment Fee
In Ontario, every new condo is covered by the Tarion New Home Warranty. Buyers are responsible for the enrolment fee, typically ranging from $585 to $6,000, plus applicable taxes.
3. Utility Meter Installation Fees
Before you take possession, utility meters for services like hydro, gas, and water must be installed. Utility connection fees can range from $500 to $2,500, depending on the service provider and project.
4. Reserve Fund Contributions
At closing, new owners must contribute an amount equivalent to two months’ maintenance fees to the condo corporation’s reserve fund. This ensures the building’s financial stability from day one.
5. Miscellaneous Closing Costs
Additional closing fees can total between $2,000 and $5,000 and typically cover:
- Deposit administration fees
- Discharge of the builder’s construction mortgage
- Tarion construction site review
- Electronic registration fees
- HST on included appliances
Common Closing Costs for All Real Estate Purchases (Resale and Pre-Construction)
Land Transfer Tax (LTT)
The Ontario Land Transfer Tax (and Toronto’s Municipal Land Transfer Tax if applicable) is a major expense calculated based on the property value:
- Up to $55,000: 0.5%
- $55,000.01 to $250,000: 1.0%
- $250,000.01 to $400,000: 1.5%
- $400,000.01 to $2,000,000: 2.0%
- Over $2,000,000: 2.5%
First-time homebuyers may qualify for rebates: up to $4,000 from the province and up to $4,475 from the City of Toronto.
Legal Fees
Hiring a real estate lawyer experienced in pre-construction transactions is essential. Expect to pay between $500 and $1,500 for their services.
Final Thoughts on Pre-Construction Condo Closing Costs
While closing costs can add a significant amount to your overall purchase price, they ensure that your new community is well-equipped with essential services and amenities. Always review Schedule X of your Agreement of Purchase and Sale to understand all applicable fees and levies.
Planning ahead for these expenses can help you enjoy a smoother, stress-free transition into your new home. Being fully informed empowers you to make better financial decisions and protect your investment.