Two Key Questions About Toronto Pre-Construction Projects

One of our YouTube channel viewers left a comment asking a sharp question: if a pre-construction project gets delayed for several years, can the buyer cancel the contract and get the deposit back? It's a fair worry, and the answer lives inside your contract. Let me walk you through it the same way I would on a screen with a client, then I'll answer the second question I get all the time: can a developer raise your price after you've already signed?

What the Outside Occupancy Date actually means

In the Agreement of Purchase and Sale, there's a section dealing with critical dates, the statement of critical dates. In the middle of that, you'll find the Outside Occupancy Date. It says that if the builder can't meet the occupancy terms by the date in the contract and hand over the home on time, you can cancel the agreement within 30 days of that Outside Occupancy Date. If you cancel in that window, you get your full deposit refunded, you get interest on that money, and you can also claim delay compensation up to a maximum of $7,500.

Here's the part most buyers miss. What usually happens with a pre-sold condo is that they set the Outside Occupancy Date something like 7 to 10 years after the original sale date. So they might say the first projected occupancy is 2024, but they set the Outside Occupancy Date at, say, 2032. That means you can't cancel and get your deposit back before that outside date arrives. Read it carefully before you sign.

Why a delay is sometimes a good thing

One thing worth saying here: these delays aren't necessarily bad. Sometimes we have a good delay, where prices are climbing so fast that it's actually in your interest to take possession a year later at a much higher value. Let me give you a real example. There's a well-known project in Toronto called The Cumberland, a tower one intersection up from Yonge and Bloor, at Yonge and Cumberland, in Yorkville, one of the best neighbourhoods in the city. These units went on the market for pre-sale in the summer of 2016, when prices were much lower. A 700-square-foot two-bedroom corner unit was listed at $639,000. That's a two-bedroom in one of the best and most expensive neighbourhoods in Toronto.

The first projected occupancy was September 2021, and the Outside Occupancy Date was six years out, in 2027. The project hit a series of delays from 2016 onward, mostly construction related: permits, site plan approvals, and a heritage issue, since parts of the old protected fabric had to be preserved. Meanwhile, from 2017 to 2019, Toronto home prices climbed hard. By 2019 the developer, Great Gulf, a reputable and well-respected firm, saw it could cancel all those pre-sale contracts and resell the units at far higher prices to new buyers. They could have cancelled. They didn't.

What Great Gulf did instead

Instead, Great Gulf wrote to the buyers and asked them to come in and cancel voluntarily. The offer: if you cancel this contract, after three years we'll give you double the deposit you put down. So if you'd put down $100,000 three years earlier, they'd give you back $200,000. It wasn't a bad offer. But many people decided to keep their contracts. Yes, the project was delayed, but the value of what they were holding had gone up far more. The only thing that changed was that the occupancy date moved to 2023.

The project reached its final stage in early 2024, and as I record this, owners have been moving in and starting to live there over the past few weeks. Even though prices have come down a bit over the last year or two and interest rates have gone much higher, the people who invested here seven years ago are still ahead and happy. So delays aren't necessarily a bad thing. But the key point is this: you need a reputable, credible developer who won't cancel the project on you. And in general, if you're getting hurt by a market correction and rising rates, my advice is to wait a bit. This market, like every market, moves in cycles. Always think long term, because in a growing market you win in the end.

Can the developer raise your price after you sign?

The second question is whether a developer can raise the unit price after signing the contract and taking the deposit. Is that even legal in Canada? The answer is no, the builder can't do that. They can't sign you at $1,000,000 and then, near closing, say prices have gone up and now they want $1,200,000, adding $200,000 to your price. That's not allowed. If developers find they sold the units too cheaply and the money doesn't cover construction costs, the only thing they can do is cancel the entire project, and even that has to be based on a legitimate, legal reason that exists in the signed agreement. After cancelling, they can resell at higher prices, but this brings serious reputational damage.

What happens when a builder goes under

There are real examples. There's a project I covered in another video where the builder declared bankruptcy and the court appointed another company to continue. The court appoints this new company, called a receiver, and the receiver's job is to find the real market price, finish the construction, and pay off the debt. The receiver may review the agreements and conclude it's impossible to finish at the old pre-sale prices. In that case, the receiver asks the court for approval to offer existing buyers a new price that covers the costs. Buyers then have the right to choose: pre-buy at the new price, or cancel. If they continue, they pay the receiver again; if they cancel, they get their money back and the receiver resells at a higher price.

In 2020, something similar happened with a project called Clover on Yonge, on Merton Street between Yonge and Mount Pleasant. The builder, Cresford, couldn't carry it and the project went into receivership. Concord came in as receiver, paid $200 million of Cresford's debts, then got court approval to make new offers to the original buyers and sell the units at higher prices. It then sold them higher and the project finished in 2022.

So which way should you go?

That's a summary of the two main questions about pre-construction projects: the conditions for getting your deposit back, and how unit pricing works if there's a delay. In general, to reach the right decision you have to review the conditions case by case. If you're an end-user who plans to live in the project, a delay like this might not sit well with you, and you may decide to get your money back and invest elsewhere. But if you're an investor, or in a position to wait, the usual advice is to let time pass and let the project finish.

Let me put it simply. If you took possession right now, late January 2024, mortgage rates are high, carrying costs are high, and the housing market isn't hot. So it might be better to take the home, say, next year, when the market is in better shape, when you're more likely to get a better mortgage rate, and when your carrying costs come down. So the delay might actually work in your favour. I'm Moe Asgarian, senior real estate broker in Toronto, and for years many of my clients have been people who pre-bought various projects. I've always tried to give them the best advice for their situation. If you need guidance on pre-buying or investing in a project, I'm here to help. If you'd like a straight answer for your own situation, fill out the form below and book a free consultation. Stay well and take care.