Understanding Your Pre-Construction Deposit Structure

Why deposits are structured in installments

In a resale purchase, you typically pay one deposit of 5% or so and then the balance at closing. Pre-construction is different. Because the building may take two to five years to complete, builders require deposits well before construction finishes — and they collect them in stages to smooth cash flow for construction financing.

The total deposit for a pre-construction condo in Ontario typically runs between 15% and 25% of the purchase price. For freehold townhouses and low-rise homes, 10–20% is more common, though this varies significantly by builder and project. Luxury projects and high-demand locations often require larger deposits.

A typical condo deposit schedule

There is no single standard schedule — each builder sets their own — but a common condo deposit structure looks like this:

• 5% on signing the purchase agreement
• 5% at 30 or 60 days
• 5% at 90 or 120 days
• 5% at 180 days or at occupancy

Some projects go further. A 20% total deposit over 365 days is common for projects with strong demand. Some luxury towers require 25% or more, sometimes with a fifth installment at the 365-day mark. Always read the deposit schedule in your Agreement of Purchase and Sale (APS) carefully — the amounts, deadlines, and payment methods are binding.

Each deposit installment must be paid on time. Missing a deadline is generally a default under the agreement. If you anticipate difficulty making a payment, contact the builder in advance — builders typically have more flexibility before a missed deadline than after.

How deposits are held in trust

All deposit funds must be held in a trust account by the builder's solicitor. This is a legal requirement under Ontario's New Home Construction Licensing Act, 2017. The builder cannot access these funds for construction or operating expenses — they remain in trust until the deal closes or is properly terminated.

You should receive a receipt or acknowledgment for every deposit payment. Keep copies of all cheques, wire transfer confirmations, or receipts. If your purchase agreement specifies that deposits earn interest while in trust, confirm this with your lawyer — most standard builder agreements do not pay interest on deposits, but some do.

Tarion deposit protection

For new condominium purchases, Tarion (Ontario's new home warranty program) provides deposit protection. If the builder becomes insolvent and cannot close the transaction, Tarion will reimburse your deposits up to $20,000 for the first deposit and up to $20,000 for subsequent deposits — for a maximum of $40,000 in total per condominium unit.

For freehold homes and townhouses (non-condominium), the deposit protection limits are higher: Tarion covers deposits up to $100,000.

These Tarion limits are important context for why some lawyers recommend buyers negotiate deposit schedules that keep any single installment within the coverage limits where possible. On a $900,000 condo with a 20% deposit ($180,000), your full deposit exposure exceeds Tarion's maximum coverage. Understanding this gap is part of knowing your risk.

What happens to your deposit at closing

At final closing, all deposits you've paid are credited toward the purchase price. If your purchase price is $700,000 and you've paid $140,000 in deposits, your mortgage and remaining cash at closing covers the $560,000 balance — plus closing costs such as land transfer tax, development charges, and legal fees.

For condominiums, "final closing" happens when the condominium corporation is registered with the province. This is different from "interim occupancy," when you can move in but don't yet own the unit. See the interim occupancy guide for how that works.

If the builder cancels the project

Builders can cancel projects — and it does happen. Reasons include insufficient unit sales, construction cost escalation, financing challenges, or changes in municipal approvals. If a builder cancels a project in accordance with the terms of the APS, they must return all deposits with interest as set out in the agreement.

Standard builder agreements give the builder broad rights to cancel — particularly if specific conditions (like obtaining a satisfactory construction permit or reaching a sales threshold) are not met within defined timeframes. Your lawyer should review and explain these conditions to you before you sign.

Tarion also provides coverage in insolvency situations. If a builder becomes insolvent before closing, you can make a deposit claim through Tarion up to the applicable limits described above.

If you can't close

If you are unable to close the transaction — because your financing falls through, your circumstances change, or you simply choose to walk away — you are generally in default of the agreement. The consequences depend on the specific terms, but typically the builder can keep all deposits paid and may pursue additional damages if the eventual resale price is lower than your original purchase price.

This is a serious risk that many buyers underestimate when they sign a purchase agreement years before closing. A lot can change: mortgage qualification rules, interest rates, income, and market conditions. Buyers who are not confident they can close in three to five years should factor this risk carefully before committing. Your lawyer can explain the specific default provisions in your agreement.