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Pre‑Construction Closing Costs: What Buyers Really Need to Know
Buying pre‑construction feels exciting — shiny brochures, modern finishes, and the promise of a brand‑new home. But behind the marketing, there’s a side of pre‑construction that catches many buyers off guard: closing costs.
If you’ve ever wondered why the “$500,000” condo doesn’t actually cost $500,000 by the time you get your keys, this is the part most brochures don’t tell you — and many realtors don’t explain clearly.
Let’s break it down so you know exactly what to expect.
🧾 1. Development Charges & Levies
This is the big one — and the one that surprises buyers the most.
Municipalities charge builders for things like roads, parks, schools, and infrastructure. Builders then pass those fees directly to you at closing.
Typical range:
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$10,000 – $30,000 for condos
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$20,000 – $50,000+ for townhomes and detached homes
Some builders cap these fees. Others don’t. If they’re not capped, your final bill can be thousands more than you expected.
🧱 2. Utility Connection Fees
Your new home needs water, hydro, gas, and sewage connections. These aren’t free.
Expect:
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$1,000 – $3,000 depending on the builder and municipality
🏢 3. Tarion Warranty Enrollment Fee
Every new home in Ontario comes with a Tarion warranty — but the enrollment fee is charged to you.
Typical cost:
📑 4. Legal Fees & Builder Adjustments
Your lawyer will review the agreement, handle closing, and ensure you’re protected. But pre‑construction closings often include extra “builder adjustments” such as:
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Admin fees
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Occupancy fees (for condos)
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HST-related adjustments
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Title registration fees
Budget:
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$2,000 – $4,000 for legal + adjustments
🏠 5. HST — Yes, It Might Apply
Most buyers assume HST is included. Sometimes it is. Sometimes it isn’t.
If you’re an investor or you don’t qualify for the rebate, you may owe up to $24,000 in HST at closing.
🔑 6. Interim Occupancy Costs (Condos Only)
This is the “phantom rent” period — when you get your keys but the building isn’t officially registered yet.
You pay:
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Interest on the unpaid balance
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Estimated taxes
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Maintenance fees
None of this goes toward your mortgage. It’s simply the cost of living in the unit before final closing.
Duration:
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3–18 months depending on the project
🧮 7. Final Closing Adjustments
These can include:
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Property tax adjustments
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Condo reserve fund contributions
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Landscaping or driveway paving fees (for freeholds)
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Additional builder admin charges
Budget:
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$1,000 – $5,000 depending on the home type
⭐ So What Does This All Mean?
When you see a pre‑construction condo advertised at $500,000, the real number you should be thinking about is closer to:
$515,000 – $545,000
depending on the builder, municipality, and whether fees are capped.
For freeholds, the gap can be even larger.
This is why many buyers — especially first‑timers — feel blindsided at closing. The glossy brochure price is only part of the story. The rest is buried in the fine print.
💡 The Smart Buyer Mindset
Pre‑construction isn’t bad — it just requires awareness.
Smart buyers:
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Ask if development charges are capped
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Review the builder’s closing cost schedule
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Budget an extra 3–5% of the purchase price
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Work with a lawyer who specializes in pre‑construction
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Compare pre‑construction vs resale to see which truly fits their budget
Sometimes, a newer resale home (one the seller already bought) is the safer, more predictable option — fewer surprises, no occupancy fees, and closing costs that are far more straightforward.
