When buying a pre-construction condo, it’s essential to consider the closing costs associated with the purchase. Even though these costs are paid at the time of closing, usually 3 or 4 years after the initial purchase, it’s crucial to factor them in from the outset. The most common closing costs are detailed in Schedule X of your purchase agreement with the builder and will be included in the Statement of Adjustment at the time of closing. Here are some of the usual adjustments on closing in most pre-construction agreements in Ontario.
1. Levies and Development Charges
Development Charges
Municipalities impose fees on developers to cover new infrastructure costs, like roads and utilities, required for new developments. These fees ensure that the cost of growth is covered by the development rather than taxpayers. Buyers of pre-construction condos are responsible for these charges, which developers include in the Purchase Agreement based on the unit size.
Education Levies
Charged to fund new schools, these levies ensure that educational infrastructure keeps pace with residential growth.
Section 37 Levies
Payments made by developers to municipalities in exchange for increased building density or other zoning amendments. The funds are used for community benefits such as parks and libraries.
Public Art Levies
Developers agree to include public art as part of their projects in exchange for zoning approvals, enhancing the community’s cultural landscape.
Parks Levies
Charged to fund the creation and maintenance of public parks, ensuring green spaces are available for residents.
Other Municipal Charges
A broad category that includes various fees imposed by municipalities on new developments, covering a range of municipal needs and improvements.
2. Tarion Warranty Enrolment Fee
Every new home in Ontario comes with a warranty, and the homeowner pays for the enrolment fee, ranging from $585 to $6,000, which is taxable.
3. Utility Meters Hook-Up Fees
Before moving into your new home, ensuring the utility connections are operational is crucial. These charges typically range from $500 to $2,500.
4. Reserve Fund
Each unit owner typically needs to provide an amount equivalent to two months’ worth of maintenance fees at the time of closing. This fund ensures the condo corporation starts with adequate funds to operate.
5. Other Miscellaneous Fees
Include various miscellaneous fees in your final closing costs, totaling around $2,000 to $5,000. These fees cover deposit administration, discharge of construction mortgage, Tarion site review, electronic registration, and HST on appliances.
Common Closing Costs for Every Transaction (Resale or Pre-Construction)
Land Transfer Tax (LTT)
LTT is a significant expense often overlooked. It’s calculated as a percentage of the property’s value, with specific rates for Ontario:
- Up to $55,000: 0.5%
- $55,000.01 to $250,000: 1.0%
- $250,000.01 to $400,000: 1.5%
- $400,000.01 to $2,000,000: 2.0%
- Over $2,000,000: 2.5%
In Toronto, buyers are subject to both the Municipal and Provincial LTT. First-time homebuyers in Ontario can receive a rebate of up to $4,000 on the provincial LTT, with an additional rebate of up to $4,475 available if the property is in Toronto.
Legal Fees
Choose a reputable lawyer experienced in pre-construction matters, with costs ranging from $500 to $1,500.
Final Thoughts
The costs mentioned above may vary for each project or builder. It’s essential to review Schedule X of the agreement of purchase for detailed information on closing costs for each project or builder. While these levies and charges increase the cost of new properties, they also ensure the necessary facilities and amenities are in place, contributing to the overall quality of life in growing cities.
By understanding and planning for these costs upfront, you can avoid unexpected expenses and ensure a smoother transition to your new home.