If you are buying a newly built home, a pre-construction condo, a new townhome, or even building a home in Ontario, there is one issue that can dramatically change your closing costs: HST. Ontario is now in the middle of one of the biggest HST affordability shifts the province has seen in years. What started as a targeted tax break for first-time home buyers has now expanded into a broader housing affordability and market-stimulating strategy involving Ontario’s earlier first-time buyer provincial rebate proposal from 2025 and the 2026 Ontario Budget proposal to temporarily expand HST relief for a much wider range of eligible buyers. The new proposal impacts a wide range of parties including first-time buyers, repeat buyers, and in some cases, certain long-term rental investors.
Why HST Matters So Much on New Homes in Ontario
Unlike most resale homes, newly built homes often involve a rebate-based tax structure rather than a simple “tax or no tax” result. This means that your real HST cost depends on factors like:
This is why buyers often misunderstand, underestimate, and underprepare for the costs they will face at final closing.
The Existing Baseline: Ontario’s HST Rebate System Before the New Changes
In Ontario, HST is 13%, which is made up of 5% federal GST and 8% provincial Ontario portion. HST generally applies to newly built homes, substantially renovated homes, many pre-construction purchases, certain owner-built homes, and some other qualifying housing arrangements. Before these newer announcements, Ontario already had a layered HST rebate system.
The Existing Ontario New Housing Rebate
Before the broader 2026 market expansion, Ontario had already announced a first-time home buyer-focused HST proposal. That earlier provincial measure was designed to mirror the federal first-time buyer structure and remove the full 8% provincial portion of HST for qualifying first-time buyers on eligible new homes.
For many qualifying transactions, the existing Ontario rebate can provide up to $24,000 in relief. CRA guidance also makes clear that in Ontario, provincial relief may still be available even where the buyer is not entitled to the federal new housing rebate solely because the home’s fair market value exceeds $450,000. (https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/gst-hst-businesses/gst-hst-rebates/new-housing-rebate.html)
In practical terms, this earlier Ontario proposal was designed to operate alongside Ontario’s existing rebate, not replace it.
The Big Shift: Ontario’s 2026 Budget Proposal
This is where the conversation changed dramatically. Ontario’s 2026 Budget proposal is not just a first-time buyer tax break. It is a temporary market stimulus program designed to support affordability, move inventory, restart pre-construction activity, and stimulate housing construction.
Ontario says it is taking steps to temporarily provide relief on the full 13% HST on qualifying new homes valued up to $1 million, with maximum relief of up to $130,000, and to preserve that same maximum rebate through $1.5 million. The rebate would then phase down to $24,000 for homes valued at $1.85 million and above. (https://news.ontario.ca/en/release/1007212/ontario-expanding-hst-rebate-to-lower-the-cost-of-new-homes-in-partnership-with-the-federal-government)
Ontario has also framed this as part of a broader affordability and economic resilience strategy. Finance Minister Peter Bethlenfalvy said the province is enhancing and expanding HST rebates to support home affordability and provide relief on one of the biggest financial transactions in Ontarians’ lives. Housing Minister Rob Flack described homeownership as a cornerstone of Ontario’s economic success and tied the measures to the province’s effort to get more shovels in the ground and build more homes faster.
What Is Different About the 2026 Ontario Proposal?
The 2026 Ontario proposal is broader in three major ways:
1. It Covers the Full 13% HST
This is no longer just about the 8% provincial portion.
Ontario says the program is designed to temporarily remove the full 13% HST in qualifying cases, with federal cost-sharing expected to support the federal 5% portion, subject to federal legislative and regulatory implementation.
2. It Expands Eligibility Beyond First-Time Buyers
There is a major shift in eligibility with multiple buyer categories. Ontario is no longer limiting the broader 2026 enhanced relief to first-time buyers.
The proposal now contemplates relief for:
It is important to keep in mind that other eligibility standards remain. Eligibility still depends on:
3. It Is Temporary
Ontario is framing this as a one-year market stimulus program, not a permanent rewrite of HST housing rules. This means timing is everything for buyers.
New Price Thresholds Under the 2026 Ontario Proposal
One of the biggest practical differences is the much more generous pricing structure. That is a very important change for higher-priced Ontario markets. It is evident that the proposal is aimed at a much broader segment of Ontario’s new housing market than many buyers initially assumed.
Full Maximum Relief
Ontario now says that homes valued up to $1 million may qualify for full relief and that same maximum $130,000 rebate would be maintained for homes valued up to $1.5 million.
Partial Relief
For homes valued between $1.5 million and $1.85 million, the rebate would be gradually reduced
Relief Floor
For higher-valued homes that would otherwise qualify under the existing system, Ontario says the expansion would preserve at least the amount currently available under the existing provincial rebate structure, meaning the relief would not drop below the ordinary $24,000 support level for otherwise qualifying homes.
Ontario 2026 Timing Rules: New Homes Purchased from a Builder
For new homes purchased from a builder under the broader Ontario 2026 expansion, the enhanced relief would generally be available if:
This is critical. A buyer may think they qualify simply because they are buying during the “right year,” but if the project timing falls outside these parameters, the expected relief may not be available.
Owner-Built Homes Under the Ontario 2026 Proposal
Ontario also says enhanced relief may apply to owner-built homes. For owner-built homes, the relief would generally be available where:
That means the program may matter not only for builder inventory and pre-construction deals, but also for certain custom builds and self-build housing projects.
Investors and Long-Term Rental Properties: Relief Exists, But It Is Limited
This is one of the most misunderstood parts of the new Ontario proposal. Ontario’s 2026 expansion does appear to create enhanced relief for certain long-term residential rental property transactions but does not out-rule every investor transaction. Ontario is using the HST relief program partly as a market stimulus tool. This is a strategy with the purpose of clearing unsold inventory, supporting rental supply, restarting pre-construction activity, and creating conditions for more housing starts.
Ontario says that, like the existing Ontario New Residential Rental Property Rebate, enhanced relief may be available where a buyer purchases or builds a new residential property to rent for long-term residential use as a tenant’s primary place of residence. That means some rental projects may qualify, but only if they fit the program’s structure.
Investor Limitations: Existing Unsold Inventory / Earlier Construction
Ontario also distinguishes between rental properties based on when construction began.
Where Construction Began On or Before March 31, 2026
Ontario says the enhanced relief would generally only apply to single-unit homes that are to be rented out to a long-term residential tenant.
That would generally include:
And Ontario says the enhanced relief would generally be available if:
That is why many people are describing this as relief aimed partly at existing unsold inventory.
Ontario Is Also Expanding Relief for Purpose-Built Rental Housing
Separate from the new-home buyer relief, Ontario has also indicated that it is taking steps to remove the full 8% provincial portion of HST on qualifying purpose-built rental housing. That is a very important supply-side measure because Ontario is not only trying to help individual buyers — it is also trying to support housing supply, foster housing development, and strengthen the rental housing pipeline
That is also why Ontario has tied these tax measures to broader housing and infrastructure funding, including the $4 billion Municipal Housing Infrastructure Program and the $1.2 billion Building Faster Fund. Ontario has also linked these measures to broader planning and development reforms, including efforts around development charges, land use planning, and strong mayor powers.
Conclusion
Ontario’s evolving HST relief framework represents one of the most significant shifts in new housing affordability the province has introduced in recent years. With the introduction of the 2026 expanded rebate program, alongside the existing Ontario New Housing Rebate, eligible buyers may benefit from substantially increased tax relief, in some cases reaching up to $130,000. However, while the potential savings are compelling, the legal structure behind these programs is complex and highly fact specific.
For this reason, buyers should not rely on assumptions, builder marketing materials, or informal advice when navigating HST treatment in new construction transactions. At Bradshaw & Mancherjee, our experienced real estate lawyers guide clients through every stage of the process with precision and clarity. We conduct thorough agreement of purchase and sale (APS) reviews, assess HST implications, confirm rebate eligibility, and identify potential closing risks before they become costly issues.
If you are purchasing a newly built home, pre-construction property, or qualifying builder inventory in Ontario, obtaining legal advice before signing is essential. The right guidance can help you fully understand your position, protect your investment, and ensure there are no surprises on closing.
SUMMARY OF ONTARIO HST REBATE CHANGES
| Change Area | Previous System | New 2026 Proposal |
| Maximum benefit | ~ $24,000 | Up to $130,000 |
| Tax coverage | 8% provincial only | Full 13% HST |
| Buyer eligibility | Limited (mainly end-users) | Expanded (first-time, repeat, some investors) |
| Price eligibility | No real price-based scaling | Full ≤ $1.5M, partial to $1.85M |
| Program structure | Single rebate | Expanded layered relief |
| Program type | Permanent system | Temporary (Apr 2026 – Mar 2027) |
| Investor access | Through NRRPR only | Expanded but restricted |
| Inventory requirement | None | Required for some investor deals |
| Timing sensitivity | Minimal | High (APS + construction deadlines) |
The Ontario real estate market has undergone a dramatic shift over the past several years. With fluctuating interest rates, tightened lending criteria, volatile property values, and increased financial pressure on buyers, failed closings—especially in pre-construction—have become significantly more common. What was once a rare and exceptional situation is now an increasingly frequent legal issue affecting buyers, sellers, lenders, and builders across the province. Over the last decade, especially during market downturn, stories about buyers walking away from purchases have resurfaced with force.
Many people assume that if they cannot close on their home, they will simply lose their deposit and walk away. Unfortunately, this assumption is dangerously incorrect. In Ontario, failing to close on a real estate transaction—whether a resale property or a pre-construction condominium—triggers severe legal, financial, and credit consequences. Courts consistently enforce purchase agreements, uphold deposit forfeiture, and award substantial damages to sellers and builders. These damages can run into hundreds of thousands of dollars and, in many cases, exceed the deposit several times over.
This article explains why failed closings occur, what the legal consequences are, how damages are assessed, what enforcement tools sellers and builders can use, what courts have said in recent case law, and what strategic options buyers can pursue to protect themselves when they realize they may not be able to close.
Why Failed Closings Are Increasing in Ontario
A real estate closing fails when the buyer cannot complete the purchase on the scheduled closing date. In the current market, the most common causes include loss of job or income, inability to satisfy lender conditions, debt-service issues caused by higher interest rates, insufficient funds for the cash shortfall, and low appraisals resulting in lower mortgage amounts than expected. For pre-construction buyers, long construction timelines mean many purchasers qualify easily when they sign the Agreement of Purchase and Sale but struggle to qualify years later when interest rates, lending rules, and market values have changed dramatically.
Banks in Ontario are required to lend based on the property’s appraised value, not the contract price. If a property appraises lower than what the buyer agreed to pay, the bank will lend less. As a result, buyers must suddenly produce tens or even hundreds of thousands of dollars more in cash to close the transaction. Many cannot. This gap—known as the appraisal shortfall—is one of the primary drivers of failed closings in today’s environment.
All of these market factors combined have resulted in a wave of buyers unable to complete their transactions. But regardless of the cause, the law is clear: buyers are held to the contract they signed, and courts do not excuse failed closings simply because market conditions changed or financing fell through.
Understanding Your Legal Exposure When You Cannot Close
Once a buyer submits an offer and the seller accepts it, the APS becomes a binding contract. At this point, both parties are legally obligated to perform, but the structure of that obligation places far more immediate and measurable risks on the buyer. Even if interest rates rise dramatically or the appraised value of the property drops, the buyer is still bound to close. When a buyer fails to close, they are in breach of the Agreement of Purchase and Sale. This breach entitles the seller to retain the deposit and sue for damages. The law’s purpose is to place the seller in the position they would have been in had the buyer completed the purchase. This means the buyer becomes responsible for any financial loss the seller suffers due to the failed closing.
Ontario courts have consistently reinforced this principle across decades of case law, showing little sympathy for buyers who default due to financing issues, market declines, or personal hardship. While judges may understand a buyer’s situation, their role is to enforce the contractual rights of the seller or builder, not to rewrite agreements because circumstances have changed. This means that in almost every failed-closing case, buyers not only lose their deposit but are also held liable for all additional damages flowing from their breach.
Damages Claimed by Builders
Many buyers believe their exposure is limited to the deposit. This is incorrect. The deposit is almost always just the beginning.
When you default on a pre-construction deal, you face:
1. Forfeiture of Deposits
This happens immediately and without negotiation.
2. Liability for the Price Gap
If the market declines and the builder sells for much less, you pay the difference. This is often hundreds of thousands of dollars.
3. Ancillary Damages
Courts routinely award:
4. Long-Term Credit Damage
A court judgment remains on your credit for six to seven years. This affects:
5. Enforcement Measures
Once a judgment is issued, builders can use:
The moment a buyer defaults, the seller is entitled to treat the contract as terminated and pursue damages. But damages are not limited to the deposit. In fact, the deposit is merely the security for performance. Actual damages far exceed the deposit itself. Damages can include the difference between the original purchase price and the eventual resale price, the seller’s carrying costs during the delay, legal fees, additional real estate commissions, mortgage interest, property taxes, utilities, and any other losses reasonably incurred due to the buyer’s failure to close. Case law across Canada, including leading decisions from Ontario courts, consistently upholds that sellers are entitled to be placed in the financial position they would have been in had the buyer closed on time.
Example of Damages that Arise in a Builder’s Deal
To illustrate the structure of buyer liability, consider a historically common scenario: A buyer purchases a home for $1,200,000 at the peak of a strong market, provides a $60,000 deposit, and waives all financing conditions because pre-approval seemed solid. Months later, interest rates rise unexpectedly, causing lenders to significantly tighten lending requirements. At closing, the lender’s appraisal values the property at only $1,050,000. The buyer’s financing is now short by $150,000. The buyer panics and fails to provide the closing funds. In the legal sense, the reason for default does not matter. The lender’s refusal to lend the full amount is not a legal excuse for failing to close. The court will not accept “my financing fell through” as a defence. Nor will the buyer’s subjective belief that the property is no longer worth what they offered. The buyer has assumed the risk when they signed the Agreement of Purchase and Sale.
When the seller resells the property for $1,050,000, the seller’s damages become clear: the $150,000 price difference between the original deal and the resale. But this is only the beginning. The seller must pay real estate commissions on the resale transaction, often close to $50,000 on a price of $1,050,000. The seller may incur a mortgage renewal fee or an interest penalty because they needed funds from the original sale to discharge a loan. They may have had to make several months of additional mortgage payments, property tax instalments, home insurance payments, and utility bills while waiting to resell. Legal fees for both the collapsed sale and the subsequent resale accumulate. These added expenses frequently add tens of thousands of dollars to the total damages. In this example, even a conservative calculation may see damages reach $225,000 or more—far greater than the $60,000 deposit. Courts in Ontario will allow the seller to sue the defaulting buyer for the difference. The deposit simply offsets the judgment; the buyer is still responsible for the remaining amount.
Ontario courts have repeatedly affirmed that deposits are forfeited automatically upon buyer default, even if the seller suffers no loss. However, if the seller suffers losses, the deposit is applied toward those losses, and the buyer must pay whatever remains. When real estate values drop significantly between the original sale date and the resale date—as occurred in 2017, again in 2020–2021, and again during rate hikes in 2022–2023—buyers who default can face catastrophic financial liability. In some cases, judgments exceeding $300,000 or even $500,000 have been issued against buyers who walked away because they could not secure financing or because the market declined. These situations are devastating, yet entirely avoidable with proper legal and financial structuring.
Risks in Pre-Construction Condominium Deals
Signing an Agreement of Purchase and Sale for a pre-construction condominium is entering into a binding contract. After the 10-day cooling-off period has passed, these contracts are firm and unconditional, and there is no financing condition or adjustment based on market value.
Financing risk is one of the principal causes of buyer default, and it remains a risk even when buyers have pre-approval letters. Pre-approval is not binding, and lenders routinely change their underwriting standards, especially during periods of rapid interest rate increases or market instability. A pre-approval obtained in January may be worthless by April if the lender has modified its risk calculations. Appraisals, too, can derail an entire transaction. Lenders typically lend based on the lower of the purchase price or the appraised value. If the appraisal is significantly below the purchase price, the buyer must provide the difference out of pocket. Many buyers who are unaware of this requirement, assume the bank will finance the full amount. When buyers are unable to cover the shortfall, the deal collapses.
Today’s buyers face unprecedented challenges. Appraisals have dropped across many condo markets by 6.5% or more, interest rates remain elevated, and lenders have tightened their approval criteria. Buyers who purchased pre-construction units several years ago at high market prices are now struggling to secure enough financing to close.
Where once the appraisal supported the contract price, many buyers now find themselves underfunded by tens or hundreds of thousands of dollars. Without additional cash, the deal collapses. Courts have repeatedly confirmed that none of these market realities excuse a failure to close.
The rise of assignment sales and pre-construction contracts adds another layer of complexity. Assignments are particularly sensitive to market fluctuations because the assignor (the original purchaser) often expects to profit from selling their contract to a new buyer. However, when markets shift downward, assignors can find themselves unable to assign their contract for the price they need. If they fail to close, they are liable not only for their deposit, but also for the developer’s damages, which may include the difference between the original sale price and the new sale price, occupancy fees, legal fees, and other losses. Developers, unlike ordinary sellers, often have broader contractual rights in the event of default, including the ability to charge administrative fees, interest, and costs in addition to damages. For buyers who purchased pre-construction units at the height of the market, failing to close may result in financial exposure far exceeding the original deposit.
If a buyer cannot close, the consequences are severe. Several recent Ontario decisions highlight how strictly courts enforce these agreements.
The Great Expense v. Sokoloff (2024): A Clear Example of Buyer Liability
In The Great Expense v. Sokoloff, the buyers agreed to close on a Muskoka property for $9.4 million. They could not secure adequate financing after their initial lender withdrew its approval. The buyers attempted to negotiate a lower price to reflect market conditions. The sellers refused and eventually re-listed the property.;
The buyers ultimately defaulted, the sellers sued, and the court found:
While the exact damages will be determined at a later trial, this case re-establishes a critical principle: even high-net-worth buyers cannot rely on failed financing as a defence. The Agreement of Purchase and Sale is binding, and market changes do not alter the buyer’s obligations.
This decision aligns with a long line of Ontario cases demonstrating the courts’ consistent treatment of failed closings.
Why Builders Are Pursuing Defaulting Buyers More Aggressively Than Ever
In past market conditions, especially during the real estate boom from 2016–2021, builders often allowed buyers to walk away from pre-construction deals with little more than a deposit forfeiture. This was because values had risen so dramatically that re-selling the property made the builder more money than the original deal would have produced. Allowing defaults was profitable.
Today, the situation is the opposite. Many markets—especially the GTA—have seen price declines. Builders are sitting on significant unsold inventory, carrying large construction loans with high interest rates, and facing pressure from lenders and trade partners. A buyer walking away today often means the builder will suffer a substantial loss. It is no longer in the builder’s financial interest to release buyers easily.
As a result, builders are now pursuing full damages through litigation far more frequently. The courts are consistently awarding these damages, provided the builder acted reasonably in attempting to mitigate their losses.
Recent Case Law on Pre-Construction Defaults
Ontario courts have issued several important decisions confirming builders’ rights in failed closings:
In Mattamy (Jock River) Ltd. v. Glover (2024), the Court reaffirmed that builders are entitled to recover substantial damages when a purchaser fails to close, provided they take reasonable steps to mitigate their losses. The decision illustrates that a builder must adjust listing prices to reflect current market conditions, actively market the property, and give genuine consideration to reasonable offers received. When these steps are taken, the builder’s actions will be viewed as reasonable, and the resulting damages—often significant—will be fully upheld by the Court.
Lecco Ridge Developments Inc. v. Vaquero (2022 ONSC 6547)
The buyer defaulted. The court confirmed:
Mattamy (Jock River) Ltd. v. Ishola (2024 ONSC 6231)
The buyer defaulted. The court confirmed:
Tabrizi v. Majesty Development Group Inc. (2022 ONSC 1933)
The buyer defaulted. The builder was awarded:
Together, these cases establish a consistent pattern: courts protect builders, enforce the contract strictly, and award damages as long as the builder acts reasonably.
The Heavy Cost of Choosing Bankruptcy
Some buyers begin to consider bankruptcy when confronted with the possibility of six-figure damage awards, but it is important to understand that bankruptcy truly is a last resort. Although a bankruptcy discharge can eliminate unsecured judgment debts, the consequences are significant and long-lasting. You will lose your deposit entirely, your credit will be damaged for many years, and you must disclose all of your assets to the trustee. Depending on your income, you may also be required to make surplus-income payments for an extended period. In some professions, a bankruptcy filing can even affect your licensing or employment status. While bankruptcy may be the only viable path for certain individuals, it should never be the first solution pursued. Far better outcomes can often be achieved through early legal intervention, negotiation, or alternative financing before considering such a drastic step.
Role of Lawyers in Default Situations
Many buyers assume their lawyer can negotiate an extension or prevent them from losing their deposit if things go wrong. But lawyers cannot unilaterally change contract terms or override the APS. Extensions require mutual agreement, and sellers have no obligation to grant them. Even if the buyer’s lawyer requests more time because of financing delays, lenders changing terms, bank errors, or last-minute issues, the seller may refuse and proceed with a default notice. Lawyers can advise, strategize, communicate, and try to negotiate, but they cannot alter the fundamental contractual risk that rests on the buyer.
At the same time, a lawyer’s guidance is critical because the period immediately before closing is often filled with panic, misinformation, and fear-driven decision-making. A well-prepared lawyer helps buyers understand their obligations months before closing. They ensure buyers are aware of appraisal risks, lender funding risks, down payment verification, title insurance provisions, and the necessity of maintaining stable financial behaviour leading up to closing. A large percentage of failed deals arise from avoidable issues: buyers who take out new loans before closing, buyers who change jobs, buyers who overestimate how much financing they will obtain, or buyers who rely on family gifts that suddenly fall through. In all these situations, legal advice combined with proper mortgage planning prevents disaster.
The Support You Need from Bradshaw & Mancherjee
Today, buyers face challenges that are completely outside of their control, but the law remains firm: if you cannot close, you may be held responsible for substantial financial losses far beyond your deposit. Builders’ claims can easily add up to tens or even hundreds of thousands of dollars. Once a builder starts legal action, your options become limited, and the outcome becomes much harder to influence.
This is exactly why getting legal help early is so important. At Bradshaw & Mancherjee, we focus on stepping in before the situation escalates. Our goal is to protect you and to explore every possible alternative to minimize your financial exposure. With experience dealing directly with builders, builder’s lawyers, lenders, and assignment buyers, our team knows how to negotiate practical solutions that can genuinely make a difference. Depending on your circumstances, we may be able to negotiate more time for your closing, help you secure alternate or short-term financing, assist in finding an assignment buyer, or pursue solutions toward a mutual release to release you from the deal. These solutions only work when they are pursued early, and they require knowledgeable legal guidance—not last-minute scrambling.
Conclusion: Protecting Yourself in a High-Risk Market
If you are worried that you may not be able to close, you shouldn’t wait until the builder issues a default notice or takes legal steps. The sooner you reach out, the more strategies we can explore to protect you. Contact Bradshaw & Mancherjee as soon as concerns arise, and we will help you understand your options, communicate with the builder, and work toward the best possible outcome. You don’t have to face this alone, and getting the right legal advice early can make all the difference.
Highlights
For many Canadians, a home represents more than just a place to live-it is often their most valuable asset. As retirement planning becomes increasingly complex, homeowners may look for ways to access the equity in their homes to supplement retirement income, pay for healthcare expenses, cover debt, or fund other financial needs. One option that has gained attention in recent years is the reverse mortgage. While reverse mortgages can provide access to cash without selling your home, they also carry financial, legal, and estate planning implications that must be fully understood before moving forward.
This guide provides a comprehensive overview of reverse mortgages, how they work, the costs involved, benefits and drawbacks, alternative options, and professional advice that homeowners should consider.
A reverse mortgage is a financial product designed for homeowners, usually aged 55 or older, that allows them to borrow money against the equity in their home without selling the property or making regular mortgage payments. Unlike a traditional mortgage, where the homeowner repays both interest and principal each month, a reverse mortgage allows homeowners to access the value of their home in tax-free cash while continuing to live in the property.
Financial institutions often refer to reverse mortgages as “equity release” because they release the value of the home as cash, allowing homeowners to use it for a variety of purposes. In most cases, homeowners may borrow up to 55% of their home’s appraised value, depending on factors such as age, home value, and lender policies. Importantly, the funds received from a reverse mortgage typically do not affect Old Age Security (OAS)or Guaranteed Income Supplement (GIS) benefits, making this option attractive for retirees seeking additional financial flexibility without impacting government support.
Eligibility for a reverse mortgage depends on several factors, including the borrower’s age, the age of any other individuals on title, the type and condition of the home, and the policies of the lender. The home used to secure the reverse mortgage must generally be the borrower’s primary residence, meaning it is occupied for at least six months of the year.
Reverse mortgages generally have higher interest rates than traditional mortgages or HELOCs. Unlike conventional loans, interest is added to the loan balance rather than paid monthly, so the total amount owed grows over time.
Additional costs to close a reverse mortgage may include:
Some costs may be included in the loan balance, while others must be paid upfront. Because fees vary between lenders, it is essential to request a full disclosure of all applicable costs before proceeding.
When accessing funds from a reverse mortgage, borrowers have the flexibility to choose between ad hoc advances and scheduled advances, depending on their financial needs and preferences.
An ad hoc advance is a one-time withdrawal that allows you to access your approved funds whenever you choose. The minimum amount for an ad hoc advance is typically $5,000, and it may be subject to a fee. If the interest rate at the time of the advance differs from your current rate, the lender will reset your interest rate as a weighted average for the remainder of your current interest rate period. This ensures that your interest costs reflect both your existing balance and the new funds advanced. Ad hoc advances are particularly useful for borrowers who have unexpected expenses or want flexibility in accessing a larger sum all at once.
Scheduled advances provide a structured approach to accessing your reverse mortgage funds. With this option, you can receive regular payments according to a pre-arranged schedule, which can be set up on a monthly, quarterly, semi-annual, or annual basis. This option is only available for reverse mortgages with an adjustable interest rate, and the interest applied to each advance is determined by the rate in effect at the time of the advance. There are no additional fees associated with scheduled advances, and the minimum amounts vary depending on the frequency of the payments: $500 for monthly advances, $1,500 for quarterly advances, $3,000 for semi-annual advances, and $6,000 for annual advances. Scheduled advances can continue for up to 20 years or until the total advances reach the maximum approved borrowing limit.
By choosing between ad hoc and scheduled advances, borrowers can tailor their access to funds to suit short-term needs or longer-term financial planning, helping them manage cash flow effectively while still living in their home.
Reverse mortgages can have different interest rate structures, which directly affect how much interest accrues over time and how your mortgage balance grows. A fixed interest rate means that the rate is guaranteed for the entire interest rate term, providing predictability and stability in your borrowing costs. In situations where you request a single advance, you may encounter a blended annual interest rate. This occurs when the outstanding balance at your current rate is combined with the new advance calculated at the then-current posted rate. The blended rate is a weighted average based on the existing balance and the amount of the new advance. Lenders will reset your fixed annual interest rate accordingly, ensuring clarity in how interest is applied to your loan.
On the other hand, an adjustable interest rate fluctuates with changes in the lender’s prime rate. With this type of reverse mortgage, your interest rate-and therefore the amount of interest that accrues-can rise or fall during the term of your mortgage, making it important to understand the potential variability in your future costs.
Reverse mortgages are also structured with a closed interest rate term, meaning you cannot prepay an amount greater than your designated prepayment privilege without incurring a prepayment charge. Unlike open-term mortgages, reverse mortgages do not offer open interest rate terms, so borrowers need to plan carefully before making large repayments.
Obtaining independent legal advice is a critical step in the reverse mortgage process. As the legal titleholder of your home, you -and, if applicable, your consenting spouse – must consult a lawyer during the application process. This ensures that you fully understand the terms and conditions of the reverse mortgage, confirms that you are making decisions with sound judgment, and protects you from undue pressure to sign documents. Independent legal advice provides an added layer of protection, helping you make informed decisions and safeguarding your interests.
Applying for a reverse mortgage involves several structured steps to ensure that the process is transparent and legally compliant. First, the product is available through institutions such as Home Trust, Home Trust or Equitable Bank, and borrowers are encouraged to meet with a mortgage broker to review their financial goals and explore reverse mortgage options.
Your mortgage broker can assist in completing the application form and submitting it for underwriting review. During this review, the lender may request additional documentation and provide a formal commitment. As part of the application process, you may also need to arrange a third-party appraisal of your home to determine its current market value.
A critical step in the process is meeting with your lawyer to obtain independent legal advice, ensuring that you understand exactly how the reverse mortgage works and that you are making informed decisions. Once this review is complete, you will sign your reverse mortgage documents in the presence of your lawyer. After all documents are signed and finalized, the lender will advance the initial funds to your closing service provider, allowing you to access your home equity safely and securely.
A reverse mortgage becomes due upon certain specific events, commonly referred to as “due dates.” The outstanding balance of your reverse mortgage must be repaid when any of the following occurs:
Understanding these triggers is essential for planning repayment and estate management, as the timing affects both financial obligations and potential prepayment charges.
Reverse mortgages provide borrowers with certain prepayment privileges, which allow you to make additional payments without incurring penalties. These privileges include:
There are exceptions to prepayment charges. For example, if the last borrower moves into long-term care or a retirement residence, the charge is reduced by 50%. Additionally, prepayment charges are waived upon the death of the last borrower.
Actions that could result in a prepayment charge include exceeding your prepayment privileges, paying off the full mortgage within the first ten years, or porting the mortgage to a new home with a reduced loan amount.
Prepayment charges are calculated based on the year in which the prepayment is made and the interest on the prepaid amount above your allowable prepayment privilege. For instance, in Year 1, the charge is equivalent to five months’ interest, while in Year 2 it is four months’ interest. From Years 3 to 5, the charge is typically three months’ interest. After ten years, borrowers can prepay the entire outstanding balance at any time without incurring a charge.
The interest amount for the prepayment is determined by multiplying the prepaid amount exceeding your privilege by the annual interest rate applicable on that date. This value is then divided by 12 and multiplied by the number of months corresponding to the prepayment year. The resulting prepayment charge is rounded to the nearest cent.
For example, if a borrower wishes to prepay $100,000 in Year Three and the annual interest rate is 6%, the calculation would be as follows: $100,000 multiplied by 0.06 equals $6,000; divided by 12 gives $500 per month; multiplied by three months results in a prepayment charge of $1,500.
Several factors can influence the prepayment charge amount over the life of a reverse mortgage. Charges may decrease if the current principal amount decreases, planned advances are not completed, or the prime rate falls for adjustable-rate mortgages. Conversely, prepayment charges may increase if the principal amount rises or the prime rate increases for adjustable-rate mortgages. Generally, the earlier a prepayment is made relative to the initial advance date, the higher the charge will be.
In addition to prepayment charges, borrowers should anticipate other potential costs when paying off a reverse mortgage. These may include a discharge registration fee and, where permitted by law, a mortgage statement fee or discharge administration fee. These costs ensure proper legal and administrative processing of the mortgage payoff. For more information on avoiding prepayment charges, please see here.
One of the main advantages of a reverse mortgage is that no regular mortgage payments are required while the homeowner continues to live in the property. This can provide significant relief for retirees or homeowners on a fixed income who may not have the cash flow to manage monthly mortgage obligations.
Another key benefit is the ability to access cash without selling the home, allowing homeowners to tap into their equity for major expenses, including home repairs, healthcare costs, or debt repayment, while still living in the home they know and love. Importantly, the homeowner retains ownership of the property, maintaining control over the home and the ability to continue living there as long as the terms of the mortgage are met.
Reverse mortgages also offer flexible options for receiving funds. Borrowers can choose a lump sum, a partial lump sum with additional funds accessed over time, or regular scheduled payments. This flexibility allows homeowners to structure the mortgage according to their financial needs and goals.
Additionally, the funds obtained from a reverse mortgage are tax-free, which can be particularly advantageous for retirees, as it does not increase taxable income. In most cases, the borrowed funds also do not affect Old Age Security (OAS) or Guaranteed Income Supplement (GIS) benefits, allowing homeowners to access extra funds without jeopardizing essential government support.
Despite these benefits, reverse mortgages come with some important considerations. The interest rates on reverse mortgages are generally higher than those on traditional mortgages or home equity lines of credit (HELOCs), meaning that the cost of borrowing can accumulate quickly over time. Because interest is added to the loan balance rather than paid monthly, the home equity decreases as interest accrues, reducing the value of the home over the long term.
Another significant consideration is the impact on an estate. When the last borrower passes away or moves out, the estate is generally required to repay the loan and accumulated interest within a set timeframe, which can place pressure on heirs or require the sale of the home. This can result in a reduction in inheritance for beneficiaries and may complicate estate administration, particularly if there are multiple heirs or outstanding debts.
Finally, reverse mortgages can make estate planning more complex, as the remaining equity in the home may be lower than expected, and families may need to navigate repayment requirements and legal processes after the borrower’s death. Borrowers should carefully weigh these factors and consult with legal and financial professionals to determine whether a reverse mortgage aligns with their long-term goals.
Home equity is the portion of your home that you truly own. It is calculated as the difference between the appraised value of your home and the total amount you owe on any secured loans, including your mortgage, home equity lines of credit (HELOCs), and other loans tied to your property.
For example, if your home is worth $250,000 and you owe $150,000 on your mortgage, your home equity is $100,000. Home equity can increase over time as you pay down loans or if the value of your home rises due to market appreciation or home improvements.
Financial institutions use your available home equity to determine how much money you can borrow. Borrowing against home equity, also called equity release, usually allows homeowners to borrow up to 80% of the home’s value, including existing mortgage balances. For example, if your home is valued at $250,000 and the maximum borrowing limit is 80% ($200,000), and you still owe $150,000 on your mortgage, you could borrow an additional $50,000. Because your home acts as security, you may be able to access a lower interest rate than with unsecured loans, but failing to meet repayment obligations could result in foreclosure.
Borrowing against home equity can involve administrative fees, including appraisal fees, title search fees, title insurance, legal fees, and possibly mortgage insurance premiums. In some cases, lenders may also need to adjust the terms of your original mortgage agreement.
Homeowners in Canada have several ways to access the equity in their homes, each with its own features, costs, and repayment obligations. Understanding these options is crucial to making an informed decision.
A second mortgage is a loan taken out on your home in addition to your first mortgage. While paying off a second mortgage, you continue making payments on your first mortgage. Because a second mortgage is riskier for lenders, interest rates are generally higher than those on first mortgages. Second mortgages typically allow homeowners to borrow up to 80% of their home’s appraised value, minus the balance of their primary mortgage. The funds are provided as a lump sum. Costs may include appraisal fees, title searches, title insurance, and legal fees. Although second mortgages provide access to equity, homeowners must ensure they can manage payments on both loans simultaneously.
A HELOC functions like a revolving line of credit secured against your home. Homeowners can typically borrow up to 65% of the home’s appraised value, repay amounts, and borrow again as needed. HELOCs usually carry variable interest rates, which change in response to market conditions. This flexibility makes them suitable for ongoing expenses, home renovations, or unexpected costs.
A home equity loan provides a one-time lump sum of funds, often up to 80% of the home’s value, depending on lender policies and existing mortgages. Borrowers repay the loan over a fixed term, with scheduled payments covering both principal and interest. Unlike a HELOC, once a home equity loan is repaid, the funds cannot be borrowed again.
A reverse mortgage is distinct from other home equity products because regular payments are not required while the homeowner lives in the home. Instead, interest accrues on the loan balance, and repayment occurs later, either when the home is sold, the borrower permanently moves out, the last borrower passes away, or the borrower defaults. Reverse mortgages typically allow homeowners to borrow up to 55% of the appraised value of the home, minus any existing mortgage balance.
One of the key benefits of a reverse mortgage is that regular payments are not required while the borrower lives in the home. Most lenders allow voluntary payments up to a certain limit, and borrowers may also repay the full loan at any time, subject to early repayment fees.
The loan balance typically becomes due when the home is sold, the borrower permanently moves out, the last borrower passes away, or the borrower defaults. Borrowers and their estates are usually given a limited period to repay the balance, which may be shorter than the time needed to administer an estate. Understanding repayment timelines is essential to avoid complications.
Defaulting on a reverse mortgage can have serious consequences, including the potential foreclosure of your home. Common causes of default include using the loan for illegal purposes, providing false or misleading information on the application, allowing the property to fall into significant disrepair, or failing to comply with the contractual obligations outlined in your mortgage agreement. It is important to note that each lender may define default differently, so homeowners should consult with their lender to understand the specific conditions that could trigger a default and the remedies or consequences that may apply.
Before deciding on a reverse mortgage, homeowners should carefully consider alternative strategies that may better suit their financial needs and long-term goals. These alternatives can include selling the home and purchasing a smaller property, renting a different home or apartment, or moving into assisted living or another type of suitable housing. Homeowners may also explore other financing options, such as a home equity line of credit (HELOC), a home equity loan, a traditional mortgage, or a personal loan. Depending on the individual’s circumstances, these alternatives may be less costly or offer greater flexibility than a reverse mortgage.
Reverse mortgages are available across Canada through a variety of lenders, including federally regulated financial institutions such as Home Equity Bank, Home Trust, andEquitable Bank, as well as provincially regulated lenders and mortgage brokers. While the core product—accessing home equity without selling your home-is similar across lenders, there are important differences in consumer protections depending on who regulates the institution.
Federally regulated institutions operate under Canada’s Financial Consumer Protection Framework (FCPF), which provides robust safeguards designed to protect borrowers. These protections include clear disclosure requirements, transparent explanations of fees and interest, and guidance to ensure borrowers understand the risks associated with reverse mortgages. Working with federally regulated lenders can provide an added layer of security, giving homeowners confidence that they are dealing with institutions held to national standards of accountability and oversight.
Provincially regulated lenders may offer reverse mortgages as well, but the level of consumer protection can vary depending on the province or territory. Borrowers should carefully review the terms and conditions offered by these institutions, as some protections afforded under federal regulation may not apply. Consulting a qualified legal professional or financial advisor is highly recommended to fully understand your rights and obligations, ensure compliance with provincial rules, and make an informed decision that aligns with your financial goals.
Additionally, working with experienced professionals can help you navigate the application process, understand interest rate structures, and plan for repayment or prepayment strategies, ensuring that your reverse mortgage works effectively as part of your broader retirement or financial planning.
Funds obtained through a reverse mortgage can generally be used for any purpose, giving homeowners significant flexibility to meet their financial needs. Common uses include funding home repairs or renovations, covering daily living expenses, paying for healthcare costs, or settling existing debts. However, borrowers should always confirm with their lender whether any restrictions or additional fees may apply to ensure they fully understand the terms of their reverse mortgage.
A key advantage of reverse mortgages is that the funds you receive are generally tax-free, allowing homeowners to access cash without increasing their taxable income. This can be particularly beneficial for retirees who rely on fixed incomes, as it enables them to supplement their living expenses or cover major costs without affecting government benefits such as Old Age Security (OAS) or the Guaranteed Income Supplement (GIS).
However, Ontario homeowners should be aware of the potential long-term tax implications, particularly with respect to capital gains. If the home is sold in the future and it is no longer considered your principal residence, the proceeds from the sale could be subject to capital gains tax. While the reverse mortgage itself does not trigger a taxable event, using the funds or altering the status of the home – for example, if it becomes a rental property or is partially sold – may affect how capital gains are calculated when the property is eventually sold.
Given the complexity of tax rules in Ontario, it is advisable for homeowners to consult a qualified tax professional before entering into a reverse mortgage. A tax advisor can help you understand how the mortgage may impact your overall tax situation, explore strategies to minimize potential tax liabilities, and ensure that accessing your home equity aligns with both your financial and retirement planning goals.
By addressing tax considerations upfront, Ontario homeowners can use a reverse mortgage confidently as part of a broader financial strategy, avoiding unexpected tax consequences and making informed decisions about their home and estate. For more information on tax and legal implications of reverse mortgages, see here.
One of the most important considerations for Ontario homeowners contemplating a reverse mortgage is its impact on estate planning and the inheritance left to family members. Because a reverse mortgage is secured against the home, the loan balance, including all accumulated interest and fees, must be repaid when the home is sold, the last borrower passes away, or other repayment conditions are triggered. This repayment is typically made from the proceeds of the home, which means that the equity available to heirs may be significantly reduced. In some cases, particularly if interest accrues over many years, the remaining value of the home may be substantially lower than initially anticipated, potentially affecting the inheritance planned for children or other beneficiaries.
Given these implications, Ontario homeowners should consider their family’s expectations and communicate openly with loved ones about their plans. Discussing a reverse mortgage with family members can prevent misunderstandings and ensure that heirs are aware of potential reductions in inheritance.
To ensure that a reverse mortgage fits seamlessly within broader estate planning objectives, it is highly recommended to consult with a lawyer or financial planner. Legal and financial professionals can help homeowners assess the long-term impact on their estate, explore strategies to minimize the reduction of inheritance, and integrate the reverse mortgage into a comprehensive estate plan. This may include reviewing wills, beneficiary designations, and other assets to balance the family’s financial interests while still meeting the homeowner’s immediate needs.
By proactively considering these factors, Ontario homeowners can make informed decisions that safeguard both their financial security and the expectations of their heirs, ensuring that the reverse mortgage serves as a helpful financial tool rather than creating unforeseen complications for their estate. For more information, please see article: Reverse Mortgage Inheritance: How Do Heirs Pay It Offby HomeEquity Bank.
Because reverse mortgages affect property rights, estate planning, and long-term finances, professional advice is essential. Homeowners should consult a financial advisor to assess affordability and explore alternatives.
At Bradshaw & Mancherjee, we understand that navigating a reverse mortgage can be complex, and obtaining expert legal advice is essential. Our experienced team ensures that borrowers fully understand the terms, risks, and obligations of their reverse mortgage agreement, providing clarity and peace of mind. In many provinces, lenders require independent legal advice before finalizing a reverse mortgage, and even where it is not mandatory, having professional legal counsel helps protect your interests and safeguards your financial future. We also guide homeowners on relevant lending rules and regulations, giving you confidence that every step of the process is handled thoroughly and correctly.
Reverse mortgages can provide financial flexibility for older homeowners seeking access to cash without selling their home. However, they come with significant costs, risks, and implications for home equity and estates.
Before proceeding, homeowners should carefully explore alternatives, consult financial advisors, and seek legal advice to ensure they make informed decisions that align with their long-term financial goals and protect their estate and beneficiaries.
| Highlights: A valid will in Ontario requires you to be at least 18, of sound mind, acting voluntarily, and signing in front of two qualified witnesses. Dying without a will means the law decides how your estate is inherited. You will have no legal estate representative. Deciding what assets to include and exclude, naming executors, guardians and beneficiaries, are all important considerations when creating a will and an estate plan. Regular updates, secure storage, and informing key people about your will help ensure your wishes are carried out smoothly and without disputes. |
What is a Will?
A will is one of the most important legal documents you can have. It sets out exactly how you want your assets, such as your money, property, and personal belongings, to be distributed when you pass away. In Ontario, a valid will ensures your wishes are respected and gives your family clear direction during a difficult time.
Your “estate” are assets that will flow through your Will. A will is the foundation of any estate plan, helping you decide who will manage your estate and how your assets should be shared.
At Bradshaw & Mancherjee, our experienced lawyers guide you step by step through the will-making process, ensuring your wishes are clearly documented and legally enforceable.
Why You Need a Will
Having a valid will gives you control and peace of mind.
A will has the power to:
Who Can Make a Will in Ontario?
You can make a will if you:
There are some exceptions to the rule.
What Happens If You Die Without a Will?
Dying without a will creates delays, confusion, and even family conflict. According to surveys, more than half of Canadian adults do not have a will, leaving their families unprepared and vulnerable.
Dying without a will is called dying intestate. If this happens in Ontario:
In most cases, someone will need to apply to the court to administer your estate, which can take months. This often causes unnecessary stress for your loved ones at an already painful time.
Elements of a Will
Crafting a will is one of the most important steps you can take to protect your loved ones and ensure your wishes are carried out. A well-drafted will is more than a legal document, it is a plan that provides clarity, reduces stress for your family, and helps avoid unnecessary disputes.
Below, we break down the essential elements of a will and what you need to know when making decisions to carry out your final wishes.
The first step in any will is to clearly identify the testator, who is the person making the will.
To avoid confusion, your will should include your full legal name. This ensures there is no doubt about whose estate is being settled and makes your intentions perfectly clear.
Executor Role & Responsibilities
An executor is also called an estate trustee in Ontario. This is the person responsible for managing your estate after you pass away.
Their responsibilities include:
Executors are also legally entitled to compensation, typically around 5% of the estate’s value, plus a small annual management fee if applicable.
Being an executor is a major responsibility. They must be organized, financially literate, and capable of handling legal and administrative duties. Executors must keep detailed records, communicate with beneficiaries, and follow Ontario estate law closely. They are often involved in dealing with complex tasks like tax filings, asset valuations, and probate applications.
Criteria for Selecting an Executor
When selecting an executor, consider the person’s:
For large or complicated estates, naming a professional executor, such as a lawyer, accountant, or trust company, can provide neutrality, reduce family conflict, and ensure the process is handled correctly.
Having a Backup Executor
It is also important to name at least one backup executor in case your first choice cannot or will not serve. Keep in mind that naming too many executors can cause delays, as they must agree on decisions unless your will specifies otherwise.
Keeping Your Executor Informed
Once you have chosen your executor, it is important to:
Making sure the executor is aware of this information helps them to stay organized and enables them to act quickly and smoothly when the time comes.
When creating a will, one of the most important steps is deciding who will inherit your assets. These individuals or organizations are known as beneficiaries. Being precise about your beneficiaries helps ensure that your estate is distributed exactly as you intended and prevents unnecessary conflict after your passing.
Identifying Beneficiaries
Your beneficiaries can include:
When naming beneficiaries, always include full legal names and their relationship to you. This reduces the risk of confusion or disputes about who you intended to inherit specific assets.
What Happens to a Minor Beneficiary’s Inheritance?
Children often require special consideration when named as beneficiaries. In Ontario, the law sets out strict rules about how a child’s inheritance is managed, depending on the amount involved and whether a will exists.
If There is a Will:
If There is No Will:
Children as Life Insurance Beneficiaries
If a child is named as the beneficiary of a life insurance policy, different rules apply.
Parents may apply for access to these funds through the Minors’ Funds Program if the money is needed for the child’s expenses.
There are different kinds of assets to think about when preparing an estate plan.
Assets included in a Will
Money
Money is often the heart of an estate. You should discuss with your lawyer where your funds are held and how they should be used, you make things much easier for your family & friends. This includes identifying accounts set aside to cover:
Be sure to include all of your bank accounts, such as chequing, savings, and money market accounts.
Real Estate
Real estate is often one of the largest assets in an estate. It could be your home, vacation property, land, or even rental buildings. Your will should clearly state who inherits each property and whether any properties should be sold.
If you have a mortgage on a property, think about how that debt will be managed:
These decisions should be clearly laid out to avoid confusion and to make sure your intentions are carried out.
Investments
Stocks, bonds, and mutual funds that are not part of a registered fund (such as an RRSP, TFSA) and that are in your name alone would flow through your will.
Business Interests
If you own a business, whether it is a large corporation, a partnership, or even a small side business, it is important to make sure you discuss it with the lawyer. You made need 2 Wills (one for probate and one for assets that won’t go through probate). A succession plan for your business can prevent confusion and keep your business running smoothly.
Check your original business documents to see if you already provided instructions about what should happen when you pass away. Some agreements specify that a business interest must go to a spouse or partner, while others require dissolution. Including your wishes in your will ensures that the transition aligns with your estate plan.
Other Assets
Not all assets are financial; some have sentimental value. Jewelry, cars, heirlooms, artwork, or collectibles can hold deep meaning for your loved ones. Your will is the best place to leave these personal items to specific family members or friends.
Assets & Property to Exclude in a Will
Just as important, however, is knowing what not to include. Some assets already have built-in ways of transferring to beneficiaries and don’t need to be repeated in your will. Understanding this can make the estate planning process feel a lot less overwhelming.
Joint Tenancy Property
Property owned in joint tenancy comes with its own rules. Because ownership is joint/shared, your share will usually transfer automatically to the surviving co-owner. That means it does not belong in your will. There are notable exceptions and should be discussed with the lawyer.
Retirement Plans
Registered funds already ask you to name a beneficiary when you open the account. Upon your passing, the funds will go directly to the people you’ve chosen. Any updates should be made directly with your plan administrator—not through your will.
Life Insurance Proceeds
Life insurance works in much the same way as retirement accounts. Since you have already named beneficiaries (and backup beneficiaries) on the policy, those proceeds will pass directly to them. There is no need to duplicate that information in your will.
Residual Clause
A residue clause is a provision in your will that covers all remaining assets after specific gifts have been distributed. It typically uses wording like “the residue of my estate” to describe everything that hasn’t been explicitly assigned.
It is a safety net for your estate that ensures nothing is left out, forgotten, or left for the courts to decide. By including a residue clause, you ensure all assets are distributed according to your wishes, including:
When parents think about making a will, they often focus on how their money and property will be divided. But if you are a parent and have children under 18, one of the most important and often overlooked steps is naming a guardian. Appointing a guardian in your will is such a critical step in protecting your child’s future.
Even if you name a guardian in your will, that appointment is only binding for 90 days. After that, the Courts retain ultimate authority to decide who will be the permanent guardian of your child. The Court’s primary responsibility is to make a decision in the best interests of the child.
Your expressed wishes are very important and carry significant weight. Placing this in a will can help prevent disputes among family members and give your child the best chance of being placed with someone you trust.
Legal Requirements for Creating a Will in Ontario
To make sure your will holds up legally, you must follow specific rules. These requirements protect your wishes, prevent unnecessary disputes, and give your loved ones clarity when it matters most.
Minimum Age Requirement
In Ontario, you must be 18 years or older to make a valid will. The law assumes that by this age, you have the maturity and understanding needed to make decisions about your property and heirs. Even if you are just starting out in the workforce and do not own much yet, having a will ensures that your assets go where you want them to and not where the law decides.
Mental Capacity
A will is only valid if the testator (the person making the will) has mental capacity at the time it is created.
This means:
Voluntary Intentions
A valid will must be made voluntarily. That means no one is allowed to pressure, manipulate, or coerce the testator into making certain decisions.
Proper Signing and Witnessing
This step is where many wills fail if not done correctly. In Ontario:
The testator (the will-maker) and both witnesses must see, hear, and interact in real time during the signing. This prevents disputes later about whether the will was signed voluntarily. For added protection, your witnesses can also sign an Affidavit of Execution, which is a sworn statement confirming that your will was signed properly. This is also used as part of the probate process.
Who CANNOT Be a Witness?
Not everyone is eligible to act as a witness. In fact, the law specifically excludes some people:
It is best to choose neutral witnesses, such as trusted friends, colleagues, or professionals who will not benefit from your estate.
The law firm that you retain will ensure the witness requirements are satisfied.
After Making Your Will
Creating a valid will is the first step in protecting your legacy, but your responsibility does not end there. To ensure your estate plan remains strong and effective, there are a few extra steps you should take beyond creating the will.
Life is constantly changing, and your will needs to be keeping up with these changes. Major life changes often call for updates to your will, such as:
Regular updates keep your will aligned with your current circumstances and wishes. Without them, your estate plan may become outdated or even contested. It is also wise to have a trusted professional, such as an experienced estate lawyer, to review updates with you. This ensures your decisions are made with a sound mind and that your wishes will be upheld if ever questioned.
Your will is more than just a legal document; it is a roadmap for your loved ones when you are no longer here. It is crucial to keep this document safe! Consider storing it in a fireproof safe. The goal is to keep your will secure but also accessible to your executor when it is needed. Misplacing or losing a will can create unnecessary stress for your family during an already difficult time.
A will only works if the right people know about its existence and location. Be sure to:
Conclusion
Creating a will is one of the most important steps you can take to protect your loved ones and secure your legacy. From deciding what assets to include and exclude, to naming guardians and beneficiaries, choosing witnesses, and ensuring your document meets all legal requirements, there are many moving parts that are required for thoughtful estate planning.
At Bradshaw & Mancherjee, we understand that estate planning can feel overwhelming, but you don’t have to navigate it alone. Our experienced team provides clear, practical advice and customized plans tailored to your unique circumstances. Whether you are writing your first will, updating an existing one, or addressing more complex estate planning concerns, we are here to guide you every step of the way.
Let us help you make confident decisions that protect your family and give you peace of mind. Contact our expert estate lawyers at Bradshaw & Mancherjee today to start your journey of safeguarding your future.
| Highlights Power of sale listings have surged across the GTA, rising 112% year over year as higher borrowing costs, job losses, and mortgage renewals at higher rates push more homeowners and investors into default. High-interest private mortgages made during the housing boom are now going delinquent Canada faces a mortgage renewal wall, with most mortgages coming due in 2025–2026 at much higher rates, pushing more households toward default. Investors are heavily affected, as many condo owners and preconstruction buyers can no longer cover costs or close on purchases. Home equity is shrinking, leaving recent buyers with little to no cushion as values return to pre-2021 levels. |
Toronto’s real estate market has entered one of the most significant transitions in recent memory. After years of rapid appreciation, bidding wars, and an upward climb in equity, the housing sector is now confronting a reality of falling prices, rising unemployment, and a surge in power of sale listings. As of mid-2025, average home prices in the Greater Toronto Area have declined by approximately five to ten percent per year after the peak in early 2022, and the pattern shows no signs of ending quickly. This decline follows a short-lived period of stability brought on by the Bank of Canada’s recent interest rate cut, which has not been enough to offset the broader economic pressures at play.
Active listings across the GTA have climbed to near record highs, and homes are taking significantly longer to sell. The supply of available properties has grown by more than 40% compared to the previous year, reflecting a clear imbalance between supply and demand. At the same time, the unemployment rate in the Toronto area has spiked to roughly 10%, which has been the highest level since 2016. Historically, there is a strong correlation between unemployment rates and the number of mortgages in arrears, and this relationship is once again becoming evident power of sale listings, continue to climb.
In October 2024, power of sale listings rose by an astonishing 112% from the previous year. This surge did not emerge overnight. Instead, it has been building steadily since early 2022, as higher borrowing costs and inflation began to erode household finances. For many homeowners, especially those who purchased near the market peak in early 2022, the combination of higher mortgage payments and declining property values has proven unsustainable.
The rising number of power of sale listings is a clear indicator of growing financial strain among homeowners. As of September 2025, there were approximately 228 new power of sale listings across the GTA. This is up 59% from the same time last year, when there were only 143 power of sale listings. In normal market conditions, the number of power of sale properties would represent less than one percent of total listings. The recent increase, therefore, represents a substantial deviation from the norm.
This trend has serious implications for both property owners and the broader housing market. During the pandemic, home prices rose so sharply that almost anyone at risk of default could simply sell their property or refinance to avoid legal action. In 2020, there were as few as four power of sale listings per month across the GTA. That number increased modestly to 33 power of sale listings per month in 2021 and 38 listings per month in 2022, before climbing to 83 listings per month in 2023. By 2024, the monthly average power of sale listings had reached 160, which is the highest level in more than a decade.
The current wave of distress is being driven by a combination of factors that have converged at an unfortunate moment in Canada’s credit cycle. Between 2022 and 2023, the Bank of Canada raised interest rates at the fastest pace in decades, tripling borrowing costs in an effort to contain inflation. Although those hikes succeeded in slowing the growth of house prices, they also introduced severe payment shocks for variable-rate borrowers and for those nearing renewal.
Two-thirds of existing mortgage holders who are renewing this year are facing equal or higher payments despite the recent rate cuts. This is because fixed-rate borrowers who secured ultra-low rates in 2020 or 2021 are now reaching the end of their terms and are encountering much higher renewal rates. It is estimated that roughly 60% of all Canadian mortgages — representing tens of billions of dollars in debt — will come due for renewal within the next twelve months. Each renewal represents another household forced to confront higher payments, tighter budgets, and fewer refinancing options.
For those who bought during the height of the market, the situation is even more precarious. Home prices have fallen back to early 2021 levels, meaning that many purchasers from 2022 or later have little or no equity remaining in their properties. Some are now in negative equity positions, owing more on their mortgage than the home is worth. Without an equity cushion, these homeowners cannot refinance, consolidate debt, or sell without taking a loss. As a result, the number of power of sale filings continues to rise, creating a feedback loop of falling prices and increasing distress.
Despite this increase, the situation remains far less severe than what occurred during the 2008 U.S. housing crisis, when the American mortgage default rate exceeded 3.8%. In Canada, the comparable figure remains below 0.3%. Ontario’s provincial arrears rate is at roughly 0.16% as of mid-2024, which is still historically low. Nonetheless, the upward trajectory suggests that more households are approaching their financial limits, and the legal system is seeing an increased number of power of sale filings.
The composition of current power of sale listings reveals how deeply the market’s stress has spread. Historically, the most at-risk borrowers were those with weak credit or irregular income, often served by private lenders. Today, the pattern is more complex. Many of the homeowners now in distress are working-class families who stretched financially to enter the market during the pandemic boom. With job losses mounting and wages failing to keep pace with inflation, even middle-income earners are finding it difficult to absorb the rising cost of borrowing.
Investors are also a major component of the current wave of power of sale listings. In the GTA, condominiums account for approximately 28% of all such listings, and within the City of Toronto, condos make up nearly half of those listings. Many of these are investment properties owned by small landlords who relied on rental income to cover mortgage payments. As interest rates rose and rental rates began to soften, the cash flow on these units turned negative. Investors with multiple properties have been quick to walk away from their most unprofitable holdings, accelerating the number of distressed sales in the condo sector.
The preconstruction market has faced particular turmoil in the past couple of years. During the height of the housing boom, investors placed deposits on condominium projects with the expectation of assigning their contracts or reselling their property upon completion for a profit. However, as units have begun to close in 2024 and 2025, many buyers have discovered that appraised values are significantly lower than the original purchase prices. In some developments, assignment sales are being offered at 2018 or 2019 prices, erasing several years of appreciation.
For these investors, financing has become a major obstacle. Lenders are reluctant to provide full mortgage financing when the appraised value of the property is less than the agreed purchase price. Some buyers have walked away entirely, forfeiting their deposits and risking legal action from developers. Others have closed on their units only to immediately list them for resale, realizing substantial capital losses. This wave of forced sales adds further supply to an already saturated market and contributes to broader price declines across the region.
Another critical element in the increase of power of sale listings is the increased exposure of private lenders in the market. During the pandemic-era housing boom, a large number of individual investors began lending money privately, often through second mortgages or short-term bridge financing. This form of lending became a popular alternative investment strategy: borrow funds at a relatively low rate through a home-equity line of credit and re-lend them at rates of ten to fifteen percent to other property owners. For a time, this so-called “Canadian carry trade” generated strong returns and seemed low risk because property values were consistently rising.
When interest rates began to climb, the economics of private lending changed dramatically. Borrowing costs rose while property values fell, compressing returns and, in many cases, eliminating them altogether. Borrowers who had relied on refinancing to repay short-term private loans suddenly found that no lender would extend new credit against falling collateral values. Defaults in the private lending market increased sharply, and many of these loans proceeded to power of sale.
Since 2022, more than 4000 power of sale filings in Ontario have originated from individual or small private lenders. As of mid-2025, roughly 65% of all active power of sale listings are tied to such lenders.
Private lenders tend to act more quickly than banks when a borrower falls behind on payments. Unlike the federally regulated “A” banks, they are not bound by the Canadian Mortgage Charter, which encourages lenders to work with borrowers experiencing hardship. Because private lenders are often individuals or small corporations relying on the interest income to service their own debts, they have strong incentives to enforce their rights quickly. Consequently, borrowers who obtained high-interest private financing are at higher risk to lose their homes when markets weaken.
This pattern creates a form of a financial feedback loop. Many private lenders borrowed against their own residences to fund these loans. When their borrowers default, the lenders themselves may struggle to meet their own obligations. A power of sale initiated by a first mortgagee can easily wipe out a second mortgage, leaving the private lender with no recovery but an ongoing debt on their own home equity line of credit. The losses cascade across the system, reducing the availability of private credit and further tightening conditions for homeowners seeking refinancing options.
The Legal Process of a Power of Sale
In Ontario, the power of sale process begins when a borrower falls into default, usually by missing mortgage payments. After a default occurs, the lender serves a Notice of Sale under the Mortgages Act. This notice provides the borrower with a minimum of 35 days to bring the mortgage back into good standing by paying the arrears, interest, and legal costs. During this redemption period, the borrower may also attempt to sell the property independently or refinance with another lender.
If the borrower fails to remedy the default within the prescribed time, the lender may proceed to take possession of the property and list it for sale. In many cases, lenders obtain a writ of possession through the Superior Court of Justice to secure lawful control of the property. Once possession is obtained, the lender typically engages a licensed real-estate agent to market the property on MLS. The listing will identify the seller as the lender, followed by the words “Power of Sale.” The accompanying remarks generally state that the property is being sold “as is, where is,” with no representations or warranties and that all offers must include the lender’s Schedule B outlining additional conditions.
Buyers considering a power of sale property must understand that the lender has never occupied the home and cannot make representations regarding its condition, zoning compliance, or structural integrity. Due diligence, including inspections and title searches, becomes even more critical. Furthermore, the sale process can be slower and less flexible than a typical purchase transaction, as lenders require time to obtain internal approvals and adhere strictly to their standard contractual terms.
Until closing, the original borrower retains the right of redemption, which is the ability to pay the full amount owed and stop the sale at any time before title transfers. For that reason, even accepted offers can be cancelled if the borrower redeems, with the buyer’s deposit refunded.
Once a power of sale transaction closes, the sale proceeds are applied to the mortgage debt, accrued interest, taxes, and legal fees. If funds remain, they are paid to the borrower or other creditors according to priority. If the proceeds are insufficient, the borrower remains liable for the deficiency balance. Many such borrowers ultimately enter bankruptcy to discharge these obligations, highlighting the severe personal and financial consequences of default.
The growing number of power of sale properties has a pronounced effect on the broader housing market. Each forced sale adds inventory that would not otherwise exist, widening the gap between the number of homes available and the number of active buyers.
When a lender lists a property under power of sale, they are motivated to obtain a fair but quick sale. While they cannot deliberately underprice the property, they are typically pragmatic in adjusting the price until it sells. Every month that a property remains unsold adds further interest charges, legal costs, and maintenance expenses that the lender may ultimately seek to recover from the borrower. As a result, lenders prefer to move inventory rather than hold it indefinitely.
This practical approach to pricing has the unintended consequence of setting lower comparable sales in nearby neighbourhoods. Appraisers and buyers rely on recent sales to determine market value, and when power of sale transactions close at reduced prices, they can depress valuations for surrounding homes. Even if power of sale listings represent only a small fraction of total transactions — 1% or less — the impact on sentiment and comparables can be significant. The effect compounds over time, creating a downward spiral in which declining prices lead to more negative equity situations, which in turn generate additional power of sale listings.
The presence of power of sale listings also alters buyer psychology. While these properties often attract heightened interest from bargain hunters, the perception of widespread distress can create caution among regular purchasers. Sellers who are not in financial difficulty may lower their expectations to remain competitive with lender-listed properties. Collectively, these forces reinforce a self-perpetuating cycle of price weakness and reduced confidence.
It is crucial for borrowers to understand that defaulting on a mortgage in Canada does not end their financial responsibility. Under Ontario law, the borrower remains personally liable for any shortfall after the property is sold. The lender may pursue a deficiency judgment to recover the remaining balance, plus legal costs and interest. This liability can persist for years and can only be eliminated through repayment or bankruptcy. For this reason, homeowners facing financial distress should seek legal advice as early as possible to explore all available options before the situation escalates to enforcement.
The Canadian Mortgage Charter encourages federally regulated lenders to offer assistance to borrowers who are 90 days or more in arrears. Options may include extending the amortization period, temporarily deferring payments, or converting variable-rate mortgages to fixed rates. While these measures can provide breathing room, they are not guaranteed, and eligibility depends on the borrower’s overall financial profile. Early communication with the lender is essential. Once a Notice of Sale has been issued, the borrower’s leverage diminishes substantially, and opportunities for resolution become limited.
For some homeowners, voluntary sale may be the most prudent solution. Selling the property before the lender takes enforcement action allows the borrower to control the timing, marketing, and pricing of the sale, potentially preserving more equity. By contrast, once the lender initiates a power of sale, legal fees, default interest, and other costs quickly accumulate, eroding any remaining equity on the property. A well-timed sale can also protect the borrower’s credit rating and avoid the reputational harm associated with formal enforcement proceedings.
Investor distress in the Toronto region is not confined to the condominium sector. Many small-scale landlords financed multiple properties under the assumption that continued appreciation would offset temporary cash-flow deficits. The reversal of that assumption has left them highly leveraged and vulnerable. Rent growth has slowed, operating expenses have increased, and financing costs have doubled or tripled. For investors who relied on variable-rate financing, the rapid escalation of interest costs has turned once-profitable holdings into sustained losses.
Because investment properties are not primary residences, investors are generally quicker to surrender them when they become unsustainable. The result is an over-representation of investor-owned properties among current power of sale listings. This, in turn, places additional strain on the rental market, as tenants may face displacement when their landlords default. The cascading effects extend well beyond the immediate parties to the mortgage.
The implications for the construction industry are also significant. Developers facing slowing sales and a wave of assignment losses have delayed or cancelled new project launches. This contraction in building activity may eventually restrict supply, but in the short term it contributes to economic slowdown and job losses in construction and related sectors. The market is thus caught in a paradox: near-term oversupply and long-term under-building, both of which stem from the same cycle of tightening credit and declining confidence.
As Toronto moves through 2025, the market continues to display all the hallmarks of a late-cycle correction. Inventory levels remain elevated, and the ratio of sales to new listings has declined to levels last observed during the 2008–2009 financial crisis. The balance of power has shifted decisively in favour of buyers, and sellers are being forced to adjust their expectations to meet a more cautious and selective market. The combination of higher borrowing costs, reduced affordability, and widespread uncertainty has produced a genuine buyer’s market across much of the Greater Toronto Area.
Average home prices are now approximately twenty-three percent below the peak recorded in February 2022, returning values to those seen in early 2021. The severity of the correction varies by property type and region. Detached homes in outer suburbs have experienced the sharpest declines, while established urban neighbourhoods have fared somewhat better due to limited supply. Condominiums, particularly those aimed at investors rather than end-users, have recorded the most significant increase in power of sale listings. These patterns suggest that price recovery will not be uniform; rather, the market will move through an extended period of re-pricing and consolidation before stability returns.
The trajectory of the market will depend largely on two variables: unemployment and mortgage renewals. Historically, mortgage arrears have correlated with unemployment. Each increase in joblessness translates directly into missed payments, as households with little savings struggle to meet their obligations. With Toronto’s unemployment rate hovering near 10%, the risk of further arrears growth is high. In parallel, the so-called “mortgage renewal wall” will continue to exert pressure on borrowers. Every month, thousands of homeowners reach the end of their low-rate terms and confront a substantially higher payment. Those unable to adjust their budgets or refinance at acceptable terms will face the difficult choice of selling or defaulting. This renewal-related distress is expected to peak in 2026.
Although power of sale is a financial process at its core, it operates within a precise legal framework that imposes obligations on both lenders and borrowers. For lenders, the duty to act in good faith and to obtain fair market value is paramount. Courts have consistently held that mortgagees exercising a power of sale are fiduciaries in a limited sense: they must protect their own interests but cannot act recklessly or oppressively toward the mortgagor. The standard applied is that of a prudent and reasonable seller. Documentation, appraisals, and marketing efforts must all demonstrate that the lender sought a fair price consistent with market conditions at the time of sale.
For borrowers, the existence of that duty provides some protection, but it does not eliminate the financial consequences of default. If a lender sells the property and the proceeds are insufficient to satisfy the debt, the borrower remains personally liable for the deficiency. Lenders commonly pursue such deficiencies through the civil courts, and judgments may be enforced through garnishment or registration against other assets. In practice, many borrowers who face large deficiencies ultimately seek relief through consumer proposals or bankruptcies under the Bankruptcy and Insolvency Act. The lasting impact on creditworthiness can be severe, often persisting for years.
It is also important to recognize that the power of sale process can intersect with other areas of law, including family law, estate law, and bankruptcy. For example, if the property is jointly owned by spouses, enforcement proceedings must comply with the Family Law Act’s provisions concerning matrimonial homes. Similarly, if one of the borrowers dies, the lender may need to coordinate enforcement with the estate trustee. These complexities highlight why early legal advice is essential whenever a borrower is in financial distress. Proactive legal guidance can identify potential defences, negotiate repayment arrangements, or facilitate a voluntary sale that mitigates further loss.
Beyond individual transactions, the surge in power of sale listings has macroeconomic implications. Forced sales increase market supply and can exert downward pressure on prices across entire neighbourhoods. As prices fall, homeowners lose equity, which in turn reduces their ability to borrow against their homes to fund their mortgage payments, renovations, education, or small businesses. The reduction in household wealth contributes to lower consumer spending, slowing overall economic activity. In a city like Toronto, where real estate and construction account for a substantial share of employment, the ripple effects can be far-reaching.
There is also an important psychological component. Rising defaults and stories of financial hardship erode public confidence. Potential buyers delay purchases in anticipation of further declines, while potential sellers rush to list before prices fall further. The resulting imbalance reinforces the downturn. Even those who remain financially secure become more cautious, choosing to save rather than spend or invest. Such shifts in sentiment can extend the duration of a correction well beyond what fundamental economic factors might dictate.
The experience of the early 1990s provides a sobering precedent. Following the 1989 market peak, Toronto home prices declined for nearly seven years as high interest rates and elevated unemployment persisted. It was not until the mid-1990s that the market began to recover. While the current environment differs in some respects—today’s mortgage underwriting standards are stricter, and the banking system is better capitalized—the parallels are difficult to ignore. Without a sustained improvement in employment conditions and a gradual reduction in debt-servicing burdens, a quick rebound appears unlikely.
From the perspective of buyers, the growing number of power of sale listings presents both opportunities and risks. On one hand, these properties can offer access to homes at prices below recent market averages. On the other hand, they require heightened due diligence and an understanding of the legal limitations inherent in such transactions. Because lenders sell properties on an “as is” basis and disclaim all warranties, purchasers must assume responsibility for verifying the condition and compliance of the property. This includes obtaining independent inspections, reviewing title for potential liens or easements, and carefully reading the lender’s Schedule B, which modifies many standard contractual terms.
The negotiation process in a power of sale transaction also differs from a traditional sale. Lenders are institutional sellers with standardized procedures and limited flexibility. Offers may take longer to receive responses, and conditions favourable to buyers—such as financing or inspection clauses—are often discouraged or removed.
Additionally, because the original borrower retains the right of redemption until closing, there is a small but real risk that a transaction may not complete if the borrower redeems at the last moment. For this reason, buyers who are under time constraints or seeking certainty of occupancy should proceed cautiously.
Legal representation is indispensable in these transactions. A lawyer experienced in power of sale purchases can review the sale documentation, confirm that the lender’s title is valid, ensure proper registration of discharge instruments, and protect the buyer’s deposit in the event the sale is terminated. Professional guidance also helps buyers understand the broader context of the sale—why the property is being sold, whether there are competing claims, and what post-closing issues may arise.
For homeowners facing payment difficulties, the most important step is to communicate early and openly with their lender. Most financial institutions prefer to avoid enforcement proceedings and are often willing to explore alternatives such as temporary payment deferrals, amortization extensions, or term conversions. These measures may not eliminate the problem but can provide time to reorganize finances or sell the property voluntarily.
Where a voluntary sale is contemplated, engaging both a real estate agent and a lawyer early in the process can yield better outcomes. A pre-emptive sale conducted before legal proceedings begin allows the homeowner to control the listing price and marketing strategy. The costs associated with a private sale are significantly lower than the legal fees, default interest, and administrative charges that accrue once a power of sale is initiated. Moreover, a cooperative approach can help preserve the borrower’s relationship with the lender and maintain a better credit profile for future borrowing.
If negotiations with the lender fail, homeowners should seek immediate legal advice regarding their rights and potential defences. Depending on the circumstances, it may be possible to challenge the lender’s calculations, negotiate a redemption plan, or explore insolvency options that prevent enforcement. Each case is fact-specific, and outcomes vary depending on the type of mortgage, the parties involved, and the timing of the default.
Toronto’s housing market is in the midst of a significant re-balancing. The forces that drove years of explosive growth—cheap credit, speculative investment, and relentless demand—have reversed. Rising unemployment, high household debt, and shrinking equity have created a more cautious environment where buyers are selective, lenders are vigilant, and homeowners are vulnerable. The increase in power of sale listings is both a symptom and a catalyst of this shift, reflecting the financial pressures on individual households while simultaneously influencing market dynamics at large.
For now, indicators suggest that power of sales will continue to rise into 2026 as the renewal cycle progresses. Each month that passes brings a new cohort of borrowers face-to-face with higher payments and diminished options. While the system remains stable and Canada’s arrears rate is still low by international standards, the trend underscores the importance of prudent borrowing, early intervention, and sound legal guidance. The recovery, when it arrives, will likely be gradual and uneven, beginning with the stabilization of employment and extending over several years.
Conclusion: Navigating the Legal and Financial Landscape
The current conditions in Toronto’s real estate market serve as a reminder that housing is deeply intertwined with the broader economy and that legal mechanisms such as the power of sale play a crucial role in maintaining balance when borrowers struggle. For homeowners, understanding the process and acting early can mean the difference between preserving equity and facing long-term financial consequences. For buyers, awareness of the legal framework ensures that opportunities are pursued with awareness of the risks. And for lenders, adherence to fair market principles and statutory duties remains essential to maintaining public confidence in the mortgage system.
In a market characterized by high debt levels and rising financial stress, the role of legal professionals becomes increasingly important. Lawyers guide clients through the technical, procedural, and human aspects of mortgage enforcement and help mitigate the losses that homeowners may inevitably face. While no legal strategy can reverse economic trends, informed decision-making and timely advice can reduce the personal impact of those trends on individual households.
Toronto’s housing market is resilient, but it is undergoing a painful correction. As the city works through this period of adjustment, the fundamental principles of fairness, transparency, and responsible lending will remain central. Those facing financial hardship should remember that there are always legal and practical avenues available before matters reach the stage of enforcement. With the right guidance, it is possible to navigate this challenging environment and emerge with financial stability intact.
How We Can Help at Bradshaw & Mancherjee
At Bradshaw & Mancherjee, our real estate lawyers have extensive experience guiding clients through complex mortgage and property matters, including power of sale proceedings, refinancing challenges, and negotiations with lenders. We understand the financial and emotional strain that accompanies the risk of losing a home or investment property, and we approach every case with diligence, discretion, and a deep understanding of Ontario’s mortgage and property laws. Whether you are a homeowner seeking to prevent a power of sale, a lender enforcing your rights, or a buyer navigating a power of sale property purchase, our firm provides the strategic legal advice and practical solutions needed to protect your legal interests and secure the best possible outcome in today’s difficult market conditions.
| Highlights: Density Boost: Taller and denser buildings now permitted near transit hubs in Toronto. Affordable Housing: Big projects must set aside up to 5% of units as affordable for 25 years. Parking Minimums Gone: There are no more mandatory parking requirements near transit hubs. Higher Property Potential: Homes near stations may be more attractive to developers and may yield more in value. Final Decision: These zoning rules took effect on August 15, 2025, and cannot be appealed |
On August 15, 2025, Ontario’s Minister of Municipal Affairs and Housing approved, with modifications, six major Official Plan Amendments (OPAs) for the City of Toronto. These amendments have wide-ranging implications for property owners, developers, and communities located in certain areas. The Minister’s decisions are final, not subject to appeal, and mark one of the most significant changes to Toronto’s land use planning framework in recent years.
For homeowners, the changes may sound like nuanced technicalities, but it is very important to understand their significant implications. These policies affect where density will be built, what kinds of housing can be approved, how much parking must be provided, and the affordability of future housing inventory in Toronto. In this article, we will explore the changes and their implications in a straightforward manner and highlight what they mean for property owners across the city of Toronto.
What Were the Zoning Requirements Before The Minister’s Approval?
Prior to the Minister’s approval of these amendments, Toronto’s zoning rules near transit stations were more restrictive and inconsistent between areas. In most residential neighbourhood designations, only low-density housing forms such as detached, semi-detached, and in limited cases multiplexes of up to four units were permitted. Apartment neighbourhoods and mixed-use areas allowed mid-rise and high-rise buildings. However, the City of Toronto had no uniform minimum density standards tied directly to proximity to transit stations. Building height permissions were often capped through zoning by-laws or Secondary Plans, which required lengthy amendment processes to increase density.
Parking minimums also applied broadly across the city, even near subway and GO stations, often requiring one or more parking spaces per residential unit. Developers therefore faced higher costs, delays, and less predictable outcomes when trying to intensify land use near transit. The new framework replaces this patchwork system with city-wide, as-of-right density requirements tied directly to transit accessibility.
What Changed on August 15, 2025?
The approvals provided by Ontario’s Minister of Municipal Affairs reshape the boundaries of where and how Toronto can grow and how housing develops around transit hubs
The Minister approved six OPAs: OPA 524, 537, 540, 544, 570, and 575. These all work to:
What Are MTSAs and PMTSAs?
Major Transit Station Areas (MTSAs) and Protected Major Transit Station Areas (PMTSAs) are lands within a 500–800 metre radius of existing or planned higher-order transit stations (like subways, LRT stops, or GO stations).
The Planning Act requires municipalities to identify these zones, set minimum density standards, and receive ministerial approval before they come into effect. For homeowners, being inside an MTSA or PMTSA boundary means your property may now be subject to new density and housing policies that were not in consideration before.
The Official Plan Amendments (OPAs)
The six OPAs approved by the Minister, OPA 524, 537, 540, 544, 570, and 575, delineate specific MTSAs and PMTSAs across Toronto:
Together, these approvals bring into effect 120 MTSAs/PMTSAs, with 12 still under consideration.
Minimum Density Requirements Established for MTSAs and PMTSAs
One of the immediate effects of the Minister’s decision is the establishment of minimum density permissions in delineated MTSAs and PMTSAs. The density permission for multiplexes and small apartments across Toronto’s transit hubs has expanded its horizons.
For Apartment Neighbourhoods, Mixed Use Areas, and Regeneration Areas:
For Neighbourhood-Designated Lands:
In addition to these minimums, the Minister confirmed that growth shall be directed to MTSAs and PMTSAs, alongside Toronto’s already identified growing areas such as the Downtown, Centres, and Employment Areas. Where Secondary Plans or Site and Area Specific Policies conflict, the policy granting greater density prevails, giving developers and homeowners clarity on which rules govern
Special Policy Areas:
The Minister carved out certain lands as “Special Policy Areas,” where minimum density requirements are reduced to 0 FSI. In these areas, existing land use rules continue to apply, and any changes to policies or development permissions require special ministerial approval.
Inclusionary Zoning: Affordable Housing Now Required in PMTSAs
The approval of PMTSAs has another important effect: Toronto’s inclusionary zoning (IZ) by-law is now active within these areas. IZ applies to larger developments (100+ dwelling units or 8,000 m²+ of residential floor area). As per Toronto’s IZ by-law, developers must dedicate up to 5% of units (or floor area) as affordable housing. Units must remain affordable for 25 years. This was reduced from the City’s original 99-year requirement by provincial regulation. Smaller buildings, purpose-built rentals, or projects that fall within transition provisions may be exempt from the IZ by-law.
This means that if your property is inside a Projected Major Transit Station Area (PMTSA) and you plan to redevelop, the profitability of your project may be affected by the IZ rules. Conversely, for homeowners in areas affected by the IZ by-law, this policy is designed to ensure that future development includes some level of affordable housing.
No More Parking Minimums in PMTSAs and MTSAs
Another impactful change that comes from the approval is the removal of parking minimums in PMTSAs and MTSAs. Amendments to the Planning Act now prohibit official plan policies or zoning that require developers to provide parking in these areas. This means that developers are no longer required to include a set number of parking spaces in new projects near transit hubs. The existing parking requirements in by-laws are void effective August 15th in these areas. Unfortunately, for homeowners, this could mean fewer parking spaces in new buildings nearby, which could require changing expectations around car use and street parking availability. However, it could also positively reduce traffic congestion in high-traffic areas surrounding transit hubs.
Development Charges and Financial Impacts
Another important impact to note is how development charges apply under the new framework. Inclusionary zoning units are exempt from development charges. For projects that include IZ units, the City’s development charge by-law applies the August 15, 2022 rates (plus indexing) to the rest of the building. This may make it more financially attractive for developers to include IZ units in their projects, as it lowers their overall costs going towards developmental charges.
What Does This Mean for Homeowners?
If you own a home in Toronto near a, here’s what to keep in mind:
What This Means for Developers
For developers:
Conclusion: Why Legal Advice Matters
The Minister’s new approvals fundamentally reshape the City of Toronto’s planning framework. For homeowners, the changes bring both opportunities and uncertainties as higher density permissions can increase property value, but inclusionary zoning and reduced parking standards may face increased redevelopment pressures. For developers, the new requirements help gain certainty and flexibility.
Because each property is affected differently, understanding the new rules is critical before making decisions about selling, redeveloping, or investing.
On July 31, 2025, the City of Toronto officially enacted the Rental Renovation Licence Bylaw, which is a landmark regulation intended to restrain “renovictions” and better protect tenants from bad-faith evictions disguised as renovation work. This new initiative is widely supported by Mayor Olivia Chow, City Council, and tenant advocacy organizations, as the bylaw marks a significant policy shift in Toronto’s ongoing effort to preserve affordable rental housing and address the growing housing crisis.
This article explains what renovictions are, outlines the core features of the new bylaw, and explores what landlords and tenants both need to know about their rights and obligations under the new legal framework.
What is a Renoviction?
In Ontario, there are two broad categories of evictions: “for cause” (or behavioural) evictions and “no-fault” evictions. Behavioural evictions occur when a tenant breaches their lease. The breach occurs through certain behaviours of the tenant, such as by failing to pay rent, causing damage, or disturbing other tenants. In contrast, no-fault evictions are permitted under specific circumstances unrelated to tenant conduct, such as when a landlord wishes to occupy the unit themselves or complete substantial renovations.
A “renoviction” is the term used to describe the eviction of tenants under the conditions of performing major renovations. While landlords are legally permitted to request vacant possession of a rental unit for substantial renovations under Ontario’s N13 notice provisions, renovictions occur when these claims are made in bad faith. Once a tenant vacates, the unit is often rented out again at significantly higher rates, especially in buildings that are not subject to Ontario’s rent control laws. Although most rental units fall under the provincial rent increase guidelines, the rental units that are first occupied after November 15, 2018, were exempt.
These practices have disproportionately affected low-income and marginalized tenants and have been widely criticized for undermining housing stability. In 2025, landlords are only permitted to raise rent by 2.5% annually, unless they apply for an above-guideline increase, which is a lengthy and heavily scrutinized process. However, once a tenant leaves, new tenancies can begin at a significantly higher market rent. This incentivizes some landlords to force out long-term tenants in order to maximize profits.
Years of Tenant Vulnerability
Toronto’s housing market has become increasingly complex, with soaring rents, limited affordable units, and long waiting times for legal recourse through the Landlord and Tenant Board. Prior to the enactment of the new bylaw, landlords could issue an N13 notice with minimal proof, giving tenants 60 days to vacate the property or contest the eviction. Tenants are often forced into these situations without legal support or knowledge of their rights. For years, tenants have voiced frustration over unfair renovictions that appeared to be little more than a strategy to reset rental prices. The new bylaw is designed to close the possibilities of such occurrences.
Requirements of the Rental Renovation Licence Bylaw
The New Rental Renovation Licence Bylaw creates a more strict and transparent process for landlords seeking to evict tenants in order to carry out substantial renovations. Here’s what it mandates:
1. Licensing Requirement
Landlords must obtain a Rental Renovation Licence from the City of Toronto before they can proceed with an eviction related to renovation work. The application along with a $700 administrative fee must be submitted within seven days of issuing an N13 notice to tenants. The N13 is a legal Landlord and Tenant Board notice to end a tenancy because the landlord wants to demolish, repair, or convert the rental unit.
2. Third-Party Verification
The landlord must include with their application a report from a qualified professional, such as a licensed architect (via the Ontario Association of Architects) or a professional engineer (via Professional Engineers Ontario), stating that the renovations truly require vacant possession of the unit.
This step ensures that cosmetic or minor upgrades, which can often be completed with tenants in place, are not used as false justification for eviction.
3. Tenant Compensation & Protection
If the renovations are deemed to require the tenant’s departure, the tenants could either choose to return or not return to the rental unit. In both cases, the landlord is responsible for accommodating the tenant.
If the tenant wishes to return, the landlord is either responsible for:
If the tenant chooses not to return, the landlord is responsible for:
In addition to these requirements, landlords are required to pay a one-time moving allowance of $1,500 for a studio or one-bedroom unit, or $2,500 for a two-bedroom or larger unit.
4. City Oversight and Enforcement
The City of Toronto’s building department will review the submitted renovation plans and permits. Failure to comply with the bylaw can result in fines of up to $100,000 and other enforcement actions.
The city also maintains a public online registry that allows tenants to check whether their landlord has obtained the necessary renovation licence. The whole process of obtaining a rental renovation licence becomes much more transparent to all the involved parties.
What Tenants Should Know
The new bylaw represents an important shift in power toward tenants. If you receive an N13 notice, these are some steps that you can take.
What Landlords Need to Do
For landlords, the new bylaw means increased obligations and more clear guidance on how to carry out necessary renovations within the law. These are the steps that landlords would have to take.
By following these steps, landlords can avoid fines, reputational damage, and legal disputes, while they join in the initiative of helping to preserve Toronto’s essential rental housing supply.
Exemptions from the Rental Renovation Licence Bylaw
The Rental Renovation Licence Bylaw applies to all residential rental units in the City of Toronto, regardless of building type or the number of units within a property. A rental unit is defined broadly as any living space rented for residential purposes. However, certain types of housing are exempt from this bylaw. These exemptions include: government-licensed or approved residences, city-operated shelters, and buildings managed by Toronto Community Housing. Additionally, student housing provided by post-secondary institutions or non-profit student co-operatives, as well as temporary accommodations like hotels and motels, are not covered. Other exclusions include buildings governed by the Housing Services Act, 2011 and designated social or affordable housing units subject to agreements with the City of Toronto. These exemptions recognize the unique governance structures of certain housing providers, while ensuring that the bylaw remains focused on the private rental market where renovictions occur more commonly.
Conclusion: A Vital Step Towards Housing Stability
The Rental Renovation Licence Bylaw marks a vital step forward in Toronto’s ongoing effort to protect tenants and preserve affordable rental housing. Concerns over renovictions, where tenants are displaced under the pretense of renovations so landlords can significantly raise rents, has been a longstanding concern in the city. These concerns have finally been addressed through this enforceable legal framework. The new bylaw targets the segments of the rental market where low-income and marginalized tenants are most vulnerable to exploitation.
Importantly, the bylaw balances accountability and fairness. For landlords undertaking legitimate renovations, it sets out a clear and transparent process to follow. For tenants, it offers critical protections, such as moving allowances and rent-gap compensation to verify compliance. Landlords may face meaningful consequences for non-compliance, including fines of up to $100,000.
At Bradshaw & Mancherjee, our Toronto real estate lawyers are here to help landlords navigate this new legal landscape and support tenants in understanding their rights. Whether you are managing a renovation, facing an N13 eviction notice, or seeking legal advice on compliance, our team is committed to providing you with the guidance and advocacy you need in this new era of housing regulation in Toronto.
As Toronto’s housing crisis continues, the city is slowly opening the door to more diverse and affordable housing options. One of the latest changes to address this crisis is the possibility of building sixplexes on certain residential lots.
In this article, we will break down what has changed, where sixplexes are allowed in 2025, and what steps you will need to take if you are thinking about building one. Whether you are a homeowner, landlord, or just exploring your options, here is your guide to navigating Toronto’s evolving multiplex rules.
What is a Sixplex?
A sixplex is a low-rise building with six separate units, and as of June 2025, new zoning rules in Toronto allow them in specific neighbourhoods. These changes are part of the city’s push to add more housing options between single-family homes and high-rises to address the housing shortage.
Where can I build a Sixplex?
Sixplexes are allowed as-of-right, which means without needing special approval in nine wards:
City planners originally recommended allowing sixplexes across all of Toronto. They argued that sixplexes would fit well into neighbourhoods and help with housing affordability. However, not all city councillors were on board. After much debate, they compromised: start with nine wards, and let the others opt in later. For everywhere else in Toronto outside of the nine wards, you are still limited to a maximum of four units—like a duplex, triplex, or fourplex—unless your local councillor pushes for a change in the future and chooses to opt in.
The Building Process
Step 1: Zoning Designation
Once you determine that your property is located in one of the nine wards where sixplexes are currently allowed, it is important to examine the zoning designation. Zoning designation outlines what kind of buildings are allowed on your lot and under what conditions.
In Toronto, residential properties are typically zoned as:
Each zone comes with its own rules, where RM zones are generally more accommodating to multiplexes than RD zones, which were originally designed for single-family homes.
Even if your ward allows sixplexes, your specific lot must meet certain development rules. These include characteristics such as:
Step 2: Physical Zoning Requirements
Even if the zoning allows sixplexes, your lot must be able to fit the building layout and meet requirements like:
It is useful to note that Toronto no longer requires parking minimums for small-scale multiplexes. Even if you cannot fit onsite parking, this would be fine, which is a huge relief for tight urban lots!
Step 3: Hire the right professionals
Once you have confirmed zoning eligibility, the next step would be to bring in a qualified architect or designer with experience in multi-unit residential buildings. For sixplex projects, it is often worth also hiring a planning consultant or permit expeditor to help navigate city approvals.
Your team will:
If your proposal falls outside of what’s permitted “as-of-right,” you’ll need to apply to the Committee of Adjustment for a minor variance, which adds time and complexity to the process.
Step 4: Building Permits
With your finalized plans in hand, it is time to apply for a Building Permit from the City of Toronto. Your submission will be reviewed by both the Zoning and Building Code teams, and it must include:
Step 5: Understand Permit Fees & Development Charges
Permit fees for a sixplex can range into the several thousand dollars (often around $10,000), depending on your project.
You will also need to budget for:
Development Charges are one-time fees that help pay for city infrastructure. The first 4 units are exempt from development charges thanks to recent provincial changes. Units 5 and 6 will likely be charged, unless you are converting an existing multi-unit property. These charges can be tens of thousands of dollars per unit, so be sure to include them in your budget. However, the waiver on the first four units makes sixplexes much more financially feasible than they used to be.
Step 6: Begin Construction
Once your permit is approved, you can begin construction. A 12–18-month timeline is expected for demolition and new build. The process involves Inspections from the city at various construction stages (e.g. foundation, framing, electrical). Coordination with contractors, trades, and inspectors are required throughout. The length of the construction phase will depend on site conditions, contractor availability, and how smoothly the process goes.
Step 7: Final inspection & occupancy
Once construction is over, final inspections need to be passed to receive an Occupancy Permit. An occupancy permit confirms that:
Once you get this clearance, you can officially lease out the units. If sixplexes are built after November 2018, they are exempt from Ontario’s rent control limits (as of 2025), giving landlords more flexibility on rent pricing.
Toronto’s Initiatives Surrounding Sixplexes
After months of debate, Toronto City Council has approved a limited rollout of sixplex housing in select neighbourhoods, which almost reached a citywide adoption. This initiative marks an important step toward building more homes and maintaining expectations of what the federal government expects through its Housing Accelerator Fund. The federal government has committed $4 billion to help cities build more homes through the Housing Accelerator Fund. To receive this funding, cities must show they have actionable plans to boost housing supply for the population. Adding sixplexes is one-way cities can qualify, since it helps increase the number of homes without needing to build high-rises.
On June 25, 2025, Toronto City Council voted to allow sixplexes in nine parts of the city without needing special approval. These include eight neighbourhoods in the Toronto-East York area and Scarborough North, where a pilot program has already been running. Councillors from the remaining 16 wards can choose to join in later by making an opt-in request. The city also promised to make sure the right services—like street cleaning, public facilities, and infrastructure upgrades—are in place where sixplexes are built.
This decision builds on Toronto’s earlier move in 2023 to allow fourplexes citywide and is a small but meaningful initiative towards increasing affordable housing options in more neighbourhoods.
Housing Accelerator Fund & Sixplexes Benefits
The HAF is part of Canada’s National Housing Strategy and is administered by Canada Mortgage and Housing Corporation (CMHC). The goal of the fund is to help municipalities remove barriers to building new homes. Through sixplexes, the creation of “missing middle” housing types -like duplexes, triplexes, and sixplexes- are encouraged. If this change comes to pass, multiple parties benefit such as municipalities, homebuilders and developers, and renters and homebuyers.
Municipalities benefit by receiving federal funding to modernize the ways they handle housing development. This includes upgrading outdated zoning bylaws, moving building permit processes online, hiring more planning staff, and improving infrastructure like roads and water systems. These improvements help cities respond more efficiently to growing housing needs without relying solely on local tax increases.
Homebuilders and developers benefit from a faster, more predictable approval process. If sixplexes can now be built “as-of-right” in some areas, developers avoid going through lengthy re-zoning or public consultation processes. With fewer regulatory obstacles and delays, projects can move forward more quickly and at a lower cost. This makes the overall process more attractive in building medium-density housing in residential neighbourhoods.
Landlords and homebuyers can also potentially benefit from this implementation. Increasing the supply of homes—especially in well-established, lower-density neighbourhoods. This can help reduce pressure on the housing market, keeping rents and house prices more manageable. These changes also create more housing options to offer for rent, such as family-sized rental units or more affordable starter homes, in areas with good access to transit, schools, and other community amenities. This gives more people a chance to live in vibrant, flourishing communities that may have previously been out of reach.
Consequences of the New Toronto Bylaw
Toronto’s recent decision to allow sixplexes in only nine of its 25 wards has big consequences. Through the Housing Accelerator Fund, the federal government promised $118 million a year to help Toronto build more homes faster. In order to be eligible for the maximum amount of funding, one major requirement was that Toronto would allow sixplexes citywide. By falling short of that goal, the city may now lose up to $30 million, which is about 25% of its annual funding.
If Toronto fails to keep the promises it made under the Housing Accelerator Fund agreement, the federal government is able to take action in multiple ways. This could include:
Why does this matter?
Partial Compliance with Federal Requirements
The Housing Accelerator Fund (HAF), launched by the federal government, correlates funding with municipal efforts to achieve for higher density housing. Full citywide approval of sixplexes was one of the expectations set by the federal government. By limiting permissions to just nine wards, Toronto may risk losing up to $30 million in federal funding, which is roughly 25% of its annual HAF allocation. Real estate developers and investors should monitor whether the city’s position will trigger funding reductions, as this could affect infrastructure investments and timelines in affected areas.
Zoning Law Implications
The council’s motion alters zoning permissions in specific wards, giving developers the green light to construct low-rise buildings with up to six units without undergoing variance or rezoning applications. In the other 16 wards, development remains the same and developers in those areas still face restrictions unless their councillor chooses to opt in. Legal counsel is essential in determining whether a specific lot qualifies for sixplex development under the new framework, and to evaluate how adjacent infrastructure improvements may affect project feasibility. If federal funding is cut, some of these infrastructure improvements could be delayed or scaled back, which may hurt the life of a project.
Infrastructure and Servicing Considerations
The city has committed to ensuring that neighbourhood infrastructure supports added density. This includes stormwater systems, waste management, and public realm maintenance. For property owners and builders, this creates potential policy opportunities and obligations, such as development charges, connection upgrades, and participation in community consultation processes.
Divided Council, Divided Communities
The decision exposed sharp divisions on council and within the community. For everyday residents, this vote touches on a deeper debate about what Toronto’s neighbourhoods should look like.
Supporters of sixplexes, including Mayor Olivia Chow and Councillor Gord Perks, see them as a solution to the city’s housing crisis. Sixplexes offer more affordable, family-sized units and help make better use of existing land, especially in areas currently dominated by single-family homes.
Critics argue that sixplex development could put pressure on local services, raise property values, and make it harder for middle-class families to afford a home in suburban areas. Some residents worry about parking, school capacity, and neighbourhood character.
The city is now in a balancing act: trying to keep federal funding, address its housing shortage, and respond to community concerns all at the same time. Whether more wards choose to opt in, and whether Ottawa enforces its funding threat will have a big impact on the city’s housing in the future.
Conclusion
Toronto’s decision to allow sixplexes in select neighbourhoods marks an important step in a much larger conversation about how the city grows and adapts to the housing challenges ahead. While the compromise does not go as far as many housing advocates and federal officials had hoped, it opens the door to more flexible, higher-density housing in parts of the city and sets the stage for more wards to follow over time. Going ahead will require careful planning, community engagement, and legal clarity to ensure housing goals are met without sacrificing livability.
As Toronto continues to adjust its policies and zoning rules, it is more important than ever to stay informed and prepared. Whether you are a developer, property owner, investor, or simply trying to understand what these changes mean for your neighbourhood, Bradshaw & Mancherjee is here to help you navigate these regulatory changes. Our Toronto real estate law firm offers clear advice, strategic planning, and up-to-date insights on how evolving regulations may impact your real estate goals and investment decisions.
Over the last two decades, the condominium market in Ontario has undergone intense transformation. Fueled by urban intensification, shifting buyer preferences, and the rising cost of land, condo living has become a prominent feature of Ontario’s real estate landscape. But the pace has changed. While new builds once led the massive shift,
So, what’s the difference between buying a condo from a builder versus purchasing a resale unit? Let’s unpack the key legal, structural, and financial distinctions you need to know.
New Builds: Buying from the Blueprint
Purchasing a pre-construction condo often means buying a unit that exists only on paper. You will sign an Agreement of Purchase and Sale (APS) well before the building is complete. The closing date could be years away.
Under Ontario law, the condo is not formally created until the declaration under the Condominium Act is registered. This declaration acts as the building’s “constitution”, where it outlines the unit boundaries, common elements, and rules of mutual land use. Once half the units are sold in the building, control of the condo shifts from the builder (or “declarant”) to an independent board through a turnover meeting. This board has two critical years to audit engineering issues, manage budget deficits, and address any construction deficiencies left behind by the builder.
To protect consumers during this vulnerable time, Ontario relies on the New Home Warranty Plan Act. Every new home, including condo units, must be enrolled in the Tarion Warranty Program. Tarion coverage attaches to the home, not the buyer, and stays in place for up to seven years, offering protection against everything from minor defects to major structural failures. After 2021, builder licensing and oversight shifted to the Home Construction Regulatory Authority, separating builder regulation from warranty management.
Resale Condos: A Move-In-Ready Reality
In contrast, purchasing a resale condo offers far more certainty. The unit is already built, the condo corporation is already operating smoothly, and closing timelines are usually between 30 to 90 days.
Resale transactions typically involve a status certificate, which outlines the financial and legal state of the condo corporation, such as its reserve fund, bylaws, rules, insurance, and any ongoing legal issues. It is essential for buyers to work with a real estate lawyer to review this carefully, as it can significantly affect the value and future expenses related to the unit.
There is no 10-day cooling-off period for resale condos, and Tarion warranty protection does not apply. But the trade-off is transparency: what you see is what you get, and you can inspect the property yourself or hire a professional to ensure it is in good shape.
Condo Operations: New Build vs Resale
In new builds, the builder maintains control until at least 50% of the units are transferred. During this phase, the builder may register bylaws and set up mutual use agreements to guide land responsibility. After the turnover meeting, a newly elected board (usually composed of at least three members) takes over and can start operating independently.
Resale condos, on the other hand, already have fully functional boards, financial histories, and community rules in place. Any desired changes to the condo’s governance documents (bylaws, declarations, etc.) must typically be approved according to the Condo Act’s voting thresholds, which happens sometimes with or without owner consent, depending on the issue.
Your Rights as a Pre-Construction Buyer
Before you are legally bound to the purchase a new build condo unit, builders must provide a comprehensive disclosure statement, outlining essential project details, budget, amenities, and more. If this disclosure is incomplete or misleading, the purchaser has the right to void the APS and recover their deposit.
Most importantly, every new build condo buyer gets a 10-day cooling-off period, starting from when you receive the fully signed APS or all required disclosure materials. During this time, you can seek legal advice, review the project’s financial status, and cancel the deal without any liability and with a full refund. This right is statutory and automatic in any pre-construction agreement of purchase and sale.
If a material change occurs after signing, such as a significant alteration in the building’s structure, amenities, or suite size, it may entitle you to a new 10-day window to reconsider. Courts have clarified that material changes are those which would substantially impact your enjoyment, the use of the unit, or its value from a reasonable buyer’s perspective.
Understanding Tarion Warranty for New Builds
Buying a pre-construction condo requires legal protection, financial security, and a regulated process that keeps builders accountable. Tarion’s warranty system is one of the most powerful tools available to new buyers in Ontario. It is a major reason why new builds are fundamentally different from resales.
Pre-Possession Coverage: Before You Move In
Before you turn the keys into your new unit, Tarion provides four key protections designed to shield purchasers from risk during the construction and closing process.
Post-Possession Coverage: After You Move In
Once you take possession, Tarion’s coverage continues and it is broken down into three time periods, each with a distinct focus:
Year 1 Coverage
This year is your chance to report the most visible, day-to-day defects, which is anything from cracked tiles to misaligned doors or heating problems.
Year 2 Coverage
This stage moves deeper into structural and health-related concerns, including:
These types of issues often emerge after a full cycle of seasonal weather, and they can be costly if left unaddressed.
Years 3 to 7: Major Structural Defects
In the final coverage window, Tarion focuses on:
The Pre-Delivery Inspection (PDI): Your First Line of Defense
Before moving in, every buyer is required to complete a Pre-Delivery Inspection (PDI) with the builder. This is a crucial walkthrough where you will note:
This inspection becomes the basis of evidence for your warranty rights. Any issue you document is assumed to have existed at possession. If you notice new problems after move-in, you have 30 to 60 days to report them to the builder.
If the builder does not resolve the issue, Tarion steps in to enforce repairs or compensate the purchaser from a builder-funded warranty fund.
What About Common Elements in Pre-Construction Condos?
Tarion does not protect individual units. Lobbies, corridors, HVAC systems, and other shared infrastructure that are considered “common elements”. These are the responsibility of the condo corporation, which are also covered under Tarion and follow the same coverage periods.
However, the protocol for filing these claims is different. The condo board must file the complaint. It is important for unit owners to stay informed and involved with their board to ensure that shared defects are reported and resolved.
Disputes and Appeals: When Things Go Wrong
Sometimes, disputes arise. If a buyer is unhappy with Tarion’s decision on repair matters, they can enter mediation, which is a binding process run by Tarion. If still unsatisfied, buyers can appeal to the Licence Appeal Tribunal, which operates independently under Ontario law. Tarion can discipline builders who fail to comply, through administrative penalties and judicial oversight.
Your Rights as a Resale Buyer
Resale units, while offering speed and transparency, do not come with Tarion protection. You buy what you see, and you are responsible for your own for future defects.
Instead, protections can be secured through the status certificate. A status certificate is a snapshot of the condo corporation’s financial health and governance at a specific moment in time. It is available to anyone who requests it and pays the $100 fee, and it must be provided within 10 days. If it is not delivered on time, the law assumes the unit has:
In such a situation, the purchaser has upper hand. If the condo board fails to disclose a financial issue, the new owner is not responsible for surprise arrears or retroactive payments.
Legal Review is Critical – Not Optional!
Whether you are eyeing a brand-new condo unit in a high-rise building or a comfy lived-in unit in a thriving community, the legal framework surrounding your purchase matters as much as the location and the layout. Your exposure to rights, responsibilities, and financial liabilities depend on the type of condo you decide to purchase. The differences begin at the heart of both builder and resale transactions which is the Agreement of Purchase and Sale. The pro-developer clauses, buyer protections, and crucial role of status certificate reviews require legal expertise and attention in different manners.
The Builder’s Advantage: APS Clauses in New Builds
New construction condos often come with clauses that are favourable to developers, and they are hidden in dense APS documents. Most buyers fail to fully understand what they are agreeing to. Two of the most significant clauses to watch for are:
This clause allows the builder to increase the purchase price if construction costs rise and pass those increases onto the purchaser. Meanwhile buyers are left in a vulnerable position and have no ability to negotiate, challenge, or opt out of these costs. If you are buying a new build, it is crucial to understand that additional charges like development levies, utility hook-up fees, and other adjustments are not covered by your mortgage. These are out-of-pocket costs due at final closing, and they can add up quickly. In such circumstances, you could sign for a $700,000 condo only to discover you owe an extra $20,000 at closing. This is a financial risk!
Most new condos advertise prices “net of HST rebate.” But who receives that rebate depends on this clause. The APS may assign the right to the rebate to the builder. The builder would then decide if the purchaser is eligible to claim it. If the purchaser does not qualify (e.g. cases where the purchaser does not intend to occupy the unit as their primary residence), the purchaser will have to pay the rebate amount back to the builder, which is often thousands of dollars.
How can we help?
These clauses reflect a broader truth: builder APS agreements are designed and structured to protect the developer’s interests, not the purchasers. This is why legal review is critical — not optional! At Bradshaw and Mancherjee, our real estate lawyers have proficient experience in identifying the financial impact of price escalation clauses and clarifying whether the HST rebate assignment puts the buyer at any financial risk earlier on. Without legal guidance, purchasers may be taken advantage of by builder-friendly clauses and unknowingly accept terms that significantly alter the total cost of their home.
APS and Status Certificates in Resale Condos: Standard Forms, Customized Protections
Resale transactions operate under a more transparent and purchaser-friendly structure. They rely on the OREA standard purchase and sale agreement, tailored for the type of condo being purchased (standard, freehold, common element, or vacant land). The consumer protection in resale condo transactions lies in the status certificate, which was previously known as the estoppel certificate.
How can we help?
At Bradshaw and Mancherjee, our lawyers meticulously review the APS and status certificate with strong attention to detail. We help you understand your risks, protect your interests, and make informed decisions.
As part of our review, we will:
If your offer is conditional on a status certificate review, we will guide you through any red flags that may give you as the purchaser the right to walk away. If the offer is not conditional on a status certificate review, we will perform a pre-offer review so that you are fully aware of the transaction you are stepping into. In both cases, we as your lawyers act as strategic advisors based on your risk tolerance and long-term investment plans.
Unlike builder contracts, resale agreements give you the flexibility to negotiate buyer protections. Our lawyers can help draft or refine custom clauses in Schedule A, including:
In our review, we also double-check that locker and parking units are registered within the same condo corporation. If they are not part of the same condo corporation and belong to a neighbouring building, we will advise on obtaining an additional status certificate and conduct a separate legal review to avoid any related title or financing complications.
Condo Closings: Managing Risks, Expectations, and Real-Life Realities
Buying a condo is more than just a legal transaction, it is a lifestyle shift, a financial commitment, and a re-evaluation of expectations. Whether you are purchasing a brand-new unit from a builder or a resale condo in an established building, the closing experience and the risks involved are very different.
New Builds: Buying Into the Future — Construction Zone from Occupancy to Closing
Client experience and education are critical when purchasing pre-construction. One of the most overlooked realities? You are often stepping into a construction zone. Even at your Pre-Delivery Inspection (PDI), unfinished hallways, ongoing noise, and blocked amenities may be part of your day-to-day for months.
All pre-construction condo units involve occupancy fees. Interim occupancy is not the same as legal ownership. You are paying fees to live in a unit you do not yet legally own. On the final closing of pre-construction condo units, additional costs arise from development charges to utility meter fees, which can total thousands of dollars.
As your lawyers, we go through the APS line by line with you to ensure you are financially prepared for adjustments, levies, and interim occupancy costs so that there are no surprises on closing day. By confirming that plans match the Agreement of Purchase and Sale, we make sure that what you believe you are buying is what you will legally receive. As a team, we help you understand what you are agreeing to, explain the risks in plain language, and advise you on any red flags.
Resale Condos: Established Living with Lifestyle Limits
Resale buyers walk into an alternate reality, where they walk into rules, restrictions, and governance structures that are already in place. In such situations, the lawyer’s review helps buyers to be aware of real-life implications of condo living beyond finances. We translate the status certificate review into practical guidance that aligns with your plans.
Do you have a pet, plan to smoke, or plan to lease your unit? We review the condo’s declaration and bylaws to flag any restrictions that could limit your use or enjoyment of the unit. With a meticulous review of the status certificate, we will distinguish what is standard from what is a red flag. We will highlight what this means to you as a buyer whether it is upcoming increases in costs or pending litigation against the condo corporation. We will also advise you on special protection clauses to add to your agreement, like key/fob inventory, renovation warranties, or special assessment responsibilities.
The Power of a Status Certificate in Court
Ontario courts have made it clear: if a condo corporation fails to disclose key financial risks or upcoming costs, the buyer cannot be held responsible for those surprises later. Two recent court decisions highlight how powerful a properly reviewed status certificate can be and the consequences when condo corporations try to hide behind incomplete disclosure.
If the status certificate is silent, the buyer is protected.
Bruce v. Waterloo North Condominium Corporation No. 26, 2023 ONC 2995
In this case, the condo corporation knew about major work that would significantly impact the building’s budget but failed to disclose it in the status certificate provided to the buyer. The condo corporation claimed that the buyer should have pieced it together from other documents, like the financial statements.
However, the court did not agree. The court held that purchasers are entitled to rely on the status certificate alone. Buyers do not have the obligation to investigate and uncover hidden financial issues. The court decided that the buyer was relieved from paying any special assessments, loans, or contributions related to that undisclosed work.
Condo corporations are liable for undisclosed financial liabilities.
Gonzalez v. YCC 242, 2024 ONC 6372
In this case, the condo corporation tried to cover its tracks after failing to disclose two major financial liabilities: a $25,000 order to remove a solarium and a $42,000 special assessment. After the purchase, the condo issued a backdated status certificate in an attempt to claim that the buyer had been properly warned. But the buyers located the original certificate received on closing, which did not mention either expense.
The court found the condo corporation’s conduct unacceptable. The court decided to order the corporation to pay $75,000 in damages to the condo owner and take on the cost of the required repairs.
Conclusion
Buying a condo, whether from a builder or as a resale, is more than a transaction, it is a legal commitment bundled in fine print, timelines, and financial liabilities. From navigating price escalation clauses and Tarion warranties in new builds to scrutinizing status certificates and hidden liabilities in resales, the details matter and missing them can be very costly to you.
This is why having a real estate lawyer on your side is essential. Beyond just reviewing contracts, we advocate for your rights, negotiate protections, and help you understand exactly what you are signing up for. Whether it is capping levies, identifying lifestyle restrictions, or catching omissions that could lead to court battle, we are by your side. By working with our team at Bradshaw & Mancherjee, you are given clarity, certainty, and peace of mind to step into your transaction with legal confidence.
In a bold move to break barriers to homeownership amongst Canada’s affordability crisis, the federal government has announced a GST relief package for first-time homebuyers. This relief provides a better opportunity for young Canadians to achieve their dreams of owning their first home. Finance Minister François-Philippe Champagne announced this measure on May 27, 2025, which is expected to save individuals up to $50,000 in taxes as they enter into the housing market for the first time [See: GST relief for first-time home buyers on new homes valued up to $1.5 million].
Previous GST/HST New Housing Rebate
Under the previous GST/HST New Housing Rebate, homeowners could have recovered a portion of the federal sales tax, whether it is the GST or the federal portion of the HST on a new or substantially renovated home. The home must have been the primary place of residence and fall between certain pricing thresholds [See: GST/HST new housing rebate].
The previous rebates apply to HST in provinces like Ontario, where the federal portion of the HST was considered for rebate. For new or substantially renovated homes worth up to $450,000 before GST, a partial rebate was available. For new homes priced below $350,000 before tax, homeowners were able to obtain a maximum rebate of 36% of the GST paid. The rebate is gradually phased out for homes priced between $350,000 and $450,000. If a new home was worth more than $450,000, the homebuyer would not be eligible for any rebate.
There were also rebates available from the provincial government for the provincial portion of HST with different rules and thresholds varying from province to province. Ontario offered homeowners a provincial rebate for new homes priced up to $350,000. A reduced rebate was available for new homes in Ontario priced up to $450,000.
The previous rebates applied to GST in provinces without HST with the same price thresholds mentioned above.
In today’s housing market, the low price cap of $450,000 made the rebate less accessible, especially in major cities with soaring house prices. This was an obstacle that the new First Time Home Buyers’ GST Rebate seeks to overcome.
The New GST Relief on New Homes
The new GST relief package is centred on the First-Time Home Buyers’ GST Rebate. This initiative allows for the complete removal of GST on new homes valued up to $1 million for eligible first-time buyers. Qualified homebuyers who purchase a new home between the prices of $1 million and $1.5 million are eligible for partial rebates. New homes above the price of $1.5 million are excluded from the rebate. Canadians are expected to save $3.9 billion over the next five years through this policy. This policy is designed to lower upfront costs of new homes and encourage the construction of new housing across Canada. [See: GST relief for first-time home buyers on new homes valued up to $1.5 million].
First-Time Home Buyer Eligibility
To qualify as a first-time home buyer:
Individuals must:
Types of Eligible Homes
The First Time Home Buyer GST Rebate covers homebuyers buying from a developer, building their own homes, or investing in a co-op share. There are certain criteria that must be met for each type of home.
If a homeowner buys a new home from a builder and uses it as their primary residence, they may be eligible to claim the rebate. The purchase agreement must be signed between May 27, 2025, and 2031. The construction of the new home must begin before 2031 and must be substantially complete before 2036.
If a homeowner chooses to build their own home, they would also be eligible for the GST paid on construction costs. The construction of their home must begin after May 27, 2025, and before 2031. The home must be substantially completed by 2036. The owner or the builder must be the first occupier of the home.
If a share is purchased in co-operative housing, the right to occupy a unit as primary residence is obtained. The purchase of the share must occur on or after May 27, 2025, and before 2031. The construction of the co-operative housing must begin before 2031 and be completed by 2036.
Limitations
There are restrictions that apply to ensure that the GST rebate benefits first time homebuyers. The rebate can only be claimed once in a lifetime. If your spouse or partner has claimed the rebate, you cannot claim it. If the original purchase agreement of a new home was signed before May 27, 2025, the rebate is not available even if the date changes after modification or assignment.
Challenges Surrounding the New GST Rebate
While the new First-Time Home Buyers’ GST Rebate is a major win for many, there is a frustrating catch for some future homeowners. The rebate would not apply if a qualifying individual signed a purchase agreement before May 27, 2025, even if they did so after the federal government publicly announced its intention to eliminate GST for first-time buyers back on March 20, 2025. Therefore, if a potential homebuyer rushed to buy a newly constructed home in good faith, expecting the rebate to apply based on the government’s own words, they would still not qualify for the rebate. That is a big disappointment for new homebuyers especially considering that the rebate can mean up to $50,000 in savings.
There is also some uncertainty about how the Canada Revenue Agency (CRA) will interpret whether a new agreement was made “primarily for bona fide purposes” and not just to qualify for the rebate. For example, if a buyer upgraded to a two-bedroom condo to accommodate a growing family, that seems like a legitimate reason but how CRA will judge these situations remains to be seen.
On top of that, it is unclear whether provinces that charge HST — like Ontario, Nova Scotia, and Prince Edward Island — will follow the federal government’s lead and waive the provincial portion of the tax for first-time buyers. If the provinces do not, the frustration for buyers who just missed the federal cutoff could grow even more.
For builders, this rebate adds another layer of responsibility. As is common practice with the previousNew Housing Rebate, many will choose to apply the GST rebate directly at the point of sale. But with the new rules, they’ll need to be extra careful. If it turns out that the buyer does not qualify, the builder could be liable to repay the rebate amount. To avoid this, builders must begin updating their processes now, which includes gathering clear declarations from buyers to confirm they meet the rebate’s criteria. [See: Tax Insights: GST relief for first-time home buyers on new homes valued at up to $1.5 million]
Conclusion
Younger generations fear the increasing housing prices in major cities and the GST relief could provide some reassurance to first-time homebuyers. Just because one is starting out their journey in the housing market, homeownership should not be out of reach. While empowering first-time homebuyers, this initiative has the capacity to stimulate growth in the construction sector causing an increase in housing supply. While the existing GST/HST New Housing Rebate remains in place for homes under $450,000, it has become less effective in today’s housing market. The new GST rebate helps fill that gap. For those who qualify, the rebate offers meaningful savings of up to $50,000, and both buyers and builders should prepare now to ensure they meet all eligibility criteria. Ultimately, the GST relief could bring many aspiring homeowners one step closer to holding the keys to their first home.
At Bradshaw and Mancherjee, we have Toronto real estate lawyers who have the expertise to help first-time buyers navigate the legal, tax, and contractual details of new home purchases with confidence. Contact us today to make sure you don’t miss out on this rebate opportunity!