Section 04

Pre-construction deposits and the real risks

Last reviewed October 30, 2026

Buying before a home is built means handing over money for something that doesn't exist yet, often for a year or more. Most London buyers who go this route end up with the home they paid for. But it pays to understand where your deposits sit, what protects them, and what can go wrong.

How deposit schedules work

Builders typically ask for deposits in stages rather than all at once. A freehold home might require a set amount at signing and another within 30 days. Pre-construction condos often spread deposits over many months. The total and the schedule vary by builder, product and market, and the agreement sets them. Some terms may be negotiable, especially in slower markets.

How deposits are protected

Freehold homes

Per Tarion's deposit protection page, freehold agreements signed since January 1, 2018 are protected up to $60,000 on prices of $600,000 or less, and up to 10% of the price (maximum $100,000) above that. Anything over the limit is not covered by Tarion, so large deposits carry more risk. Ask how any excess is held, and have your lawyer confirm it.

Tarion has also announced a 45-day rule: freehold buyers who register their purchase with Tarion within 45 days of signing qualify for the maximum coverage, while later or missed registrations fall under a separate, capped fund. Tarion's page says this has been deferred to January 1, 2027, so check its current status and register promptly either way.

Condos

Condo deposits must be held in trust, and per Tarion, if a builder doesn't return a deposit after terminating, Tarion's protection is up to $20,000. Check the rules in the Condominium Act and confirm the details with your lawyer. See tarion.com.

The real risks

1. Delays

The most common risk by far. Supply chains, labour, weather and municipal approvals all affect timelines. The Tarion Addendum sets out how builders may extend closing dates, the notice they must give, and when you may be entitled to compensation. Plan for flexibility. Don't give notice on your rental, or sell your current home, based on a tentative date.

2. Project cancellation

Builders can sometimes terminate projects, for example if they don't reach sales targets or can't get approvals, under conditions in the agreement and Addendum. You'd generally get your deposit back (with interest in some cases), but not the time or the price you locked in. In a rising market, that lost opportunity can be costly.

3. Price and closing-cost surprises

The base price is usually fixed once you sign, but closing adjustments may not be. Development charge increases, utility connection fees and other items can be passed to buyers unless capped. See closing costs.

4. Appraisal and financing gaps

Your lender will order an appraisal near closing. If values have fallen since you signed, the appraisal may come in below your purchase price, and you'd need to cover the gap. Interest rates and lending rules can also change between signing and closing. Talk to a lender at the start, and stay in touch.

5. Changes to the product

Agreements typically allow builders to substitute materials of "equal or better quality" and make minor changes to plans. Read those clauses, and keep copies of the floor plan and features list you signed.

6. Your own circumstances changing

A job change, a relationship change or a move can all happen between signing and closing. Check whether your agreement allows assignment, and on what terms. See assignment sales.

Protecting yourself

• Check the builder in the HCRA's Ontario Builder Directory: licence, conduct and warranty history.
• Get legal review before the agreement is firm: a condition for freehold, the 10-day period for condos.
• Visit the builder's past projects in London and talk to owners if you can.
• Don't stretch on deposits. Keep a cushion for closing costs and surprises.
• Read the Addendum. It's the Tarion-mandated part of the contract that sets your rights on dates and termination.