7 Red Flags to Watch for in a Pre-Construction Agreement of Purchase and Sale

A pre-construction Agreement of Purchase and Sale (APS) can run 70 to 120 pages, and the clauses that cost Canadian buyers the most are almost never on the first page. Builders write these contracts; you get 10 days (in Ontario) to read them. Below are the seven clauses that cause the most financial damage when they go unnoticed.

1. Unlimited adjustments and closing costs

Every pre-construction APS includes an adjustments schedule — Tarion enrolment, utility hookups, development charges, education levies, HST rebate assignment, occupancy fees. Many builders add these as uncapped line items. "Development charges to be adjusted based on actual charges at time of closing" can mean a $5,000 estimate becomes $25,000.

What to look for: dollar caps next to each adjustment. No cap = risk. Ontario buyers: the Consumer Protection statement introduced in 2022 caps some municipal charges, but builders can still pass through items outside the statement.

2. The delayed occupancy / delayed closing fine print

Tarion's delayed-closing regime gives buyers up to $7,500 in compensation when a builder misses the firm closing date. But the APS defines which date is "firm." Builders often list a tentative date, a firm date 18 months later, and an outside date further still. The outside date is what actually binds them.

What to look for: a single firm occupancy date, clear notice rules, and explicit reference to Tarion's Addendum. If the APS says "time is of the essence" only for the buyer, that's asymmetric.

3. Assignment restrictions and fees

Most pre-construction APS contracts restrict or ban assignments (selling your contract before closing) without builder consent. Builder "assignment fees" of $5,000–$15,000 plus legal fees are common, and some builders reserve the right to withhold consent entirely.

If rates move against you or your circumstances change between signing and occupancy (typically 2–4 years), this clause determines whether you can exit. See our guide on assignment clauses for what's negotiable.

4. Deposit held "in trust" — by whom?

In Ontario, deposits on a new condo must be held in a trust account under the builder's lawyer per section 81 of the Condominium Act, 1998. Tarion's role for condos is a statutory backstop capped at $20,000 per unit if the trust itself fails. For new freehold, deposits are covered directly by Tarion: up to $60,000 on homes priced ≤ $600,000, or up to $100,000 (10% of price) on homes over $600,000. Outside Ontario, protection varies by province. Watch for:

• Deposits held by the builder directly (not a lawyer's trust account).
• Deposits used for construction financing — legal under some provincial regimes but increases risk of loss in builder insolvency.
• References to "interest payable to the vendor" — in most provinces the interest on deposits belongs to the buyer unless you explicitly waive it.

5. Unilateral change rights

Look for clauses that let the builder substitute materials, finishes, layouts, or amenities "of equivalent or better quality, at the vendor's sole discretion." "Equivalent" is doing a lot of work in that sentence — it can turn hardwood into laminate, a pool into a party room, and 9-foot ceilings into 8-foot.

What to look for: any changes should require written notice and, for material changes, a right for the buyer to rescind.

6. HST rebate assignment

The Ontario New Housing HST rebate historically caps the provincial portion at $24,000, with a separate federal rebate on top. Per the 2026 Ontario Budget, for eligible agreements of purchase and sale dated between April 1, 2026 and March 31, 2027, enhanced relief of up to $130,000 is available on new homes valued up to $1 million — representing the full 13% HST. Construction must begin by December 31, 2028 and be substantially complete by December 31, 2031. Most APS contracts require you to assign the rebate to the builder at closing, which means they keep it if:

• You don't qualify as an owner-occupant (e.g. you plan to rent the unit on day one).
• You can't produce the paperwork CRA requires within 12 months.

If you're buying an investment property and the APS assumes owner-occupancy, you may owe the builder the rebate amount at closing — a surprise bill that's materially larger under the 2026 rules than it was pre-2026. Get an accountant to confirm eligibility before signing, and read the assignment clause with the new numbers in mind.

7. Interim / occupancy fees

For condos, there is usually a period between occupancy (when you move in) and final closing (when the building is registered and you take title), during which you pay occupancy fees: effectively rent to the builder covering their financing, property taxes, and common expenses. This can last 2 months or 18 months.

Occupancy fees are not equity. They don't reduce your mortgage. For a $700,000 unit, expect $2,500–$3,500/month during the interim period. Factor this into cash flow — many buyers don't budget for it and end up paying rent to the builder while still paying their existing mortgage.

How to review the APS efficiently

1. Start with Schedule A, Schedule B, and any disclosure statement — these contain 80% of the risk.
2. Read the delayed-closing clauses and the assignment clause end-to-end, not just the headings.
3. Calculate the total of all possible adjustments if each line item hits its uncapped worst case.
4. Get a real estate lawyer review before the cooling-off period expires (10 days in Ontario for new condos).

Most of the damage from a pre-construction purchase comes from a handful of clauses written to shift risk to the buyer. Spotting them before you sign — or during the cooling-off period — is the single highest-leverage thing you can do.