Main expenses to consider for buying a pre-construction condo

26. May 2020 16:22

Are you thinking about buying a pre-construction condo? Here are the main expenses you’ll need to consider.

As you’re considering buying a pre-built new condo in the GTA, it’s important to know that the purchase price is only a portion the total condo ownership cost. In addition to your property purchase/mortgage expenses you will also have to cover a few additional items such as condo fees, insurance and property tax.

Most of the fees are based upon the size or value of your unit, the number and types of amenities and staff required to run the facilities. For example, a building that has underground parking will typically have higher maintenance fees than one that does not.

The following is a brief overview of the main expenses that usually accompany pre-built condo ownership in Toronto.

Pre-Registration costs

For all intents and purposes, once you move into a newly constructed condo building your paying rent to start. That is, until your new condo building is “registered” with a provincial land registry office. The monthly “occupancy fee” you are charged by the development once you are living in the building but before the building is registered does not go towards your mortgage. Once the building registration takes place, normal mortgage payments processes then kick in.

Here is an example of how these “pre-registration” rental costs are calculated:

Purchase price :$200.000

Deposit paid to the builder: 20% / $40.000

The remaining balance due to the builder : $160.000

Interest to the builder for this remaining balance. Builders typically take the 1 year Mortgage interest rate posted from Bank of Canada. So if the interest rate is 3.75% it would be

$160.000 x 3.75% = $6.000/12 = $500 monthly

Additionally you have to pay condo fees, let’s say $200 monthly and property taxes, calculated based on the purchase price and the property tax rate, 200.000 x 0.08 = $1600 a year – $133.33 monthly.

The occupancy fee will be $500 + $200 + $133.33 = $833.33 monthly until registration is complete.

Here is some additional information on the difference between pre-registration and registration.

Condo Maintenance Fees 

Condo fees are your share of the costs that contribute to running the building as a whole for all common areas, including amenities such as party rooms, swimming pools and fitness facilities.  Typically these fees cover items such as maintenance staff, security and repairs and are usually based on the total square footage of your condo unit. These fees also include general maintenance e.g. window cleaning, snow shoveling, cleaning and landscaping.

Portions of your monthly condo fees go into a “reserve fund”. The reserve fund is there to cover any major repairs and replacements of common elements that will be needed as time passes. These can include the roof, exterior of the building, sidewalks, roads, sewers, heating, electrical, plumbing, elevators, laundry and recreational facilities.

Increasing condo fees 

Condo fees can be increased due to an unexpected major repair not covered by the reserve fund, a lawsuit involving the condo corporation or to keep up with general rising costs of services.

Newly built condos may increase significantly in the second or third year due to certain amenities not being included in the first year. For example, a guest suite that a corporation may buy as an asset might not take effect until the second year.

Special assessments 

This is an expenses that can be charged from time to time on top of regular monthly condos fees to help pay for major unexpected repairs or to cover shortfalls in the reserve fund.

Legal Fees

While the builder usually pays real estate service costs, you will have to pay for your own legal representation. Typically real estate lawyers charge between $700.00 and $2000.00 for their services, which are mostly focused on making sure the contract you sign is in order and meets industry and governmental regulations.

Mortgage Fees

Unless you buy your condo outright, at some point you are going to need a loan. Loans associated with real estate are usually called mortgages. After the bank lends you the money needed to pay for your condo in full, a mortgage is put in place to give individuals an easy and structured process to pay that money back. This is usually structured as a monthly repayment schedule. A mortgage repayment schedule is usually set up so that in the early years, a greater percentage of each payment covers interest charges and a smaller percentage covers principal repayment. Over time, this changes so that a greater percentage of each payment goes towards paying down the principal, and less towards paying interest.

The more of the principal you pay down, the greater the equity you build up in your condo. Basically, equity is the amount of your condo that you own. For example, if your condo is worth $350,000 and your mortgage is for $300,000, you have $50,000 in equity.

Resident Insurance

In most cases, you will be responsible for and required to maintain and repair the basic elements of your unit. Interior elements of your condo unit, such as plumbing and electrical are usually covered by the condo corporation’s insurance. The rest, basically everything from the paint inward, including your furniture and other contents of the unit, would be your financial responsibility.

Insurance policies may also have an impact on you if there is damage to your condo or surrounding condos; For example if there is a flood in your condo and it damages the condo below you, you may be responsible for costs associated with the repair of the resulting damage to other condos or to common areas. Part of the cost of tenant insurance also goes to cover you for liability should you directly cause any damage to the common areas of the building.


Interim Occupancy


You’ve probably heard this term before and you’re wondering exactly what it means. Before you take official ownership and your mortgage can be registered, you will be paying a monthly fee to the developer. This is known as interim occupancy fees. These fees are similar to what your monthly carrying costs on the unit will eventually be.

They’re calculated based on an estimate of taxes, condominium fees and a monthly interest payment on the remainder of the total purchase price, meaning the money you haven’t put down to date.

It’s also important to note that you won’t be paying the maintenance fees directly to the condo corp or property tax directly to the City during your Interim Occupancy. The maintenance fees and property taxes are directly paid by the developer, so you can’t officially be billed by the City for property taxes during Interim Occupancy.

A common concern is that because a builder is receiving these fees, they benefit from extending this period for as long as possible, but this is a common misconception. In fact, there are stipulations in the Condominium Act that address the calculation of these fees, preventing developers from earning a profit this way.

During the interim occupancy period, you are legally allowed to occupy your suite, but as the building hasn’t been registered, you don’t have the title and your mortgage won’t be valid quite yet. This stage can last anywhere from a few months to two years.


Maintenance fees, hydro, gas, water, and property taxes all contribute to the cost of your Interim Occupancy Fees.


The occupancy fees you will be paying the developer to occupy your suite during this time will be calculated on a few different factors including:

  • Interest on the unpaid balance of the purchase price of your condo, which is based on the bank’s rate at the time of your interim occupancy date. To be clear, this is the total purchase price, minus your down payment.
  • An estimate on the municipal taxes for your unit.
  • Condo maintenance fees - a projected common expense contribution to keep the building running.

These fees are charged monthly during the interim occupancy period and are usually given to the developer in the form of post-dated cheques. When you meet with your lawyer to sign the Interim Closing Papers, you will also be giving them the cheques to send to your builder.

Another important part of interim occupancy is the TARION warranty process. As soon as you are granted occupancy of your unit, your one-, two- and seven-year TARION warranties begin. You can fill out your first TARION warranty form within the first 30 days of occupancy. The warranty on the common elements of your building will not begin until your condominium is registered.

Recap of Breakdown of Potential Closing Costs in the City of Toronto


Below is a rough estimate of what you could pay at final closing for a pre-construction condo priced at $600,000 in Toronto, which is usually around between 8 to 10% of the purchase price. (Please note that these costs vary based on your contract):

  • Common Expenses/Maintenance Fees/Condo Fees - Approximately $600 to $1200.
  • Reserve Fund - Usually equivalent to two months of condo fees, which could be approximately $1200.
  • Realty Taxes/Property Taxes - This can vary, but our estimate for the City of Toronto is 0.75%, which would total approximately $5,000 in this case.
  • Miscellaneous Costs including: Utility hookup fees, Tarion Warranty Enrollment Fee, Deposit Administration/Letter Charges, Discharge of Construction Mortgage, Site review by Tarion, Electronic Registration Fee, HST on Appliances - These costs that can add up to approximately $4,000 or $5,000.
  • Park Levies, Community Improvement Fees, Art and/or Education Levies - When a new space is developed, the developers are required to pay the municipality a certain amount for new park space, community resources or public art projects, if applicable. In turn, this is worked into the buyer’s closing costs. For a unit of our estimated price, this could be approximately $6,000.
  • Development Charges - Approximately $12,000.
  • Buyer’s Legal Fees - $1900.
  • Land Transfer Tax (Municipal) (Provincial) - This is based on purchase price - use our LTT calculator.
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