The APS for a pre-construction home is a complex legal document. This guide explains the key sections, important clauses, and why professional legal review is critical.
What Is the Agreement of Purchase and Sale?
The Agreement of Purchase and Sale (APS) is the legally binding contract between you and the builder for the purchase of your pre-construction home. Unlike resale transactions where the standard Ontario Real Estate Association (OREA) form is commonly used, pre-construction agreements are drafted by the builder's legal team and tend to be significantly longer and more complex.
A typical pre-construction APS can run 30 to 60 pages or more, including schedules, addenda, and disclosure statements. Understanding what this document contains and what it means for your rights and obligations is essential before you commit.
Key Sections of the Agreement
Purchase Price and Payment Terms
This section specifies the total purchase price, what is included in that price, and the deposit schedule. Pay close attention to whether the purchase price is inclusive of HST (common for freehold homes where the buyer qualifies for the new housing rebate) or whether HST is additional.
The deposit schedule outlines the exact amounts and dates for each installment. Ensure these align with your financial plan and that you can meet every payment on time.
Description of the Property
The APS describes the home you are purchasing, including the lot number, home model, elevation, and any selected upgrades. Review this section carefully to confirm that it matches what you discussed with the sales team. Any discrepancies should be corrected before signing.
Construction and Completion Timeline
Builders provide estimated dates for construction milestones and closing. In Ontario, the Tarion Addendum (discussed below) governs how delays are handled. The APS will reference these timelines and the builder's obligations regarding schedule changes.
Closing Cost Adjustments
This is one of the most important sections to review carefully. Pre-construction closing costs go beyond the purchase price and can include:
- Development charges: Levied by the municipality to fund infrastructure like roads, sewers, and parks
- Education levies: Charged by the provincial government
- Utility connection fees: For water, sewer, hydro, and gas connections
- Park dedication fees: Municipal charges for parkland contributions
- Meter installation fees: For water and utility meters
- Grading and sodding deposits: Refundable deposits held until landscaping meets municipal standards
Some builders cap certain closing cost adjustments, while others pass through all charges at whatever rates apply at the time of closing. Understanding which costs are capped and which are open-ended is critical for budgeting.
Builder's Right to Substitute
Most agreements include a clause allowing the builder to substitute materials, fixtures, or specifications with alternatives of equal or comparable quality if the specified items become unavailable. While this is a practical necessity, understand that "comparable quality" is somewhat subjective. Note the specific language used and discuss any concerns with your lawyer.
Assignment Clause
The assignment clause governs whether and how you can sell your purchase agreement to another buyer before closing. Most builders restrict assignments, requiring their written consent and charging an assignment fee (often 1 to 5 percent of the purchase price, plus legal costs).
If there is any possibility that you may need to sell before closing, understand the assignment terms before signing.
The Tarion Addendum
All pre-construction agreements in Ontario must include the Tarion Addendum, a standardized document that protects the buyer's rights regarding:
- Firm closing date: The builder must provide a firm closing date, and any extensions must follow specific protocols
- Delayed closing compensation: If the builder delays closing beyond the permitted windows, the buyer may be entitled to financial compensation
- Termination rights: If delays exceed certain thresholds, the buyer may have the right to terminate the agreement and receive a full refund of deposits
The Tarion Addendum uses a specific date-setting framework (Statement of Critical Dates) that governs how closing dates are established and modified. Your lawyer should explain this framework in detail.
Disclosure Obligations
Builders in Ontario are required to provide certain disclosures to buyers, including information about the development's zoning, any known environmental issues, planned land uses in the surrounding area, and other material facts that could affect the buyer's decision.
Review the disclosure statement carefully. If the development is adjacent to future commercial zones, transit corridors, or other land uses that could affect your enjoyment of the property, these should be disclosed here.
Why Legal Review Is Essential
The pre-construction APS is not a document you should sign without professional review. A real estate lawyer experienced in new-home transactions can:
- Identify clauses that are unusually one-sided or that expose you to unexpected costs
- Explain your rights under the Tarion Addendum
- Clarify the closing cost structure and help you budget accurately
- Review the assignment, substitution, and termination clauses
- Ensure the agreement accurately reflects what was promised during the sales process
Legal review should be completed during the 10-day cooling-off period for freehold homes. Do not wait until after the cooling-off period expires, as your ability to cancel without penalty depends on acting within this window.
Final Thoughts
The Agreement of Purchase and Sale is the foundation of your pre-construction purchase. Taking the time to understand its contents and having it reviewed by a qualified lawyer protects your interests and helps you enter the transaction with clarity about what you are agreeing to.
Have Questions About Pre-Construction?
Matthew Caporiccio can help you understand pricing, deposit structures, and availability at The Valleys of Thornhill and other pre-construction projects across the GTA.
