Quick answer: In Ontario, a builder can only cancel a pre-construction agreement for reasons allowed in the mandatory Tarion Addendum, such as missing zoning approvals, low sales or no construction financing, and only by set deadlines. If it cancels:
- You get all your money back, with interest, within 10 days.
- You don't have to sign a release to get it.
- A cancellation outside the Addendum's rules can make the builder liable for damages.
Project cancellations are every pre-construction buyer's worst fear. With slow sales and tight construction lending in 2025 and 2026, more Ontario buyers are asking what happens if their project never gets built.
The good news: Ontario has firm rules. Your deposit comes back with interest, the builder can't pressure you into a release, and some cancellations are illegal. The catch: the rules depend on the clauses in your Agreement of Purchase and Sale (APS), and the time to check them is before you sign.
This guide explains when a builder can legally cancel, what you get back, how deposit protection works if the builder goes broke, and what the courts said in two 2026 cases. Facts are current as of October 2026.
Can a builder legally cancel my pre-construction purchase in Ontario?
Yes, but only in narrow cases. Every new home APS in Ontario must include the Tarion Addendum. It overrides anything in the builder's own schedules that conflicts with it. The Addendum allows "early termination conditions" of only two kinds:
- Approval conditions. For example, zoning or official plan changes, lot consents, servicing capacity, hard services, or site plan and development agreements. Neither side can waive these.
- Builder-benefit conditions. Selling enough units to reach a sales threshold, getting project financing the builder is satisfied with, basement walkout approval, or confirming the buyer has enough financial resources. Only the builder can waive these.
The Addendum does not allow a condition tied to getting a building permit, an occupancy permit, or completing the home. Any other condition for the builder's benefit is void.
Outside these conditions, a builder may end the deal only for a buyer's breach (such as a missed deposit) or under general legal rules like frustration. A delay in closing alone is not a reason to terminate.
What deadlines does the builder have to meet?
Each early termination condition must have a date in the Addendum's Schedule A. These are the key timing rules:
| Rule | What it means for you |
|---|---|
| Condition deadline | Can be no later than 90 days before the firm closing or firm occupancy date. If no date is filled in, or a later one is, it defaults to 90 days before. |
| Freehold sales or financing condition | Must be satisfied no later than 9 months after you sign the APS. |
| Approval condition not met | The builder must send written notice within 5 business days after the deadline. No notice means the condition is treated as not met, and the deal ends. |
| Sales or financing condition | The builder must give notice on or before the deadline. No notice means the condition is treated as satisfied or waived, and your deal stays firm. |
| Buyer's financial-resources condition | Must be satisfied or waived within 60 days of signing (or of your own financing condition clearing). |
| Refund after cancellation | All money paid, plus interest, within 10 days of termination. |
Deadlines matter. In Shiralian v. Wyldewood Creek Inc. (Ontario Court of Appeal, March 2026), the Addendum's 90-day rule set the builder's financing-condition deadline at August 1, 2021. The builder cancelled on November 29, 2021, almost four months late, so the cancellation was a breach.
What do I get back if my builder cancels?
Under the Tarion Addendum, when the builder terminates (for any reason other than your breach), it must refund:
- Every deposit you paid.
- Money paid for upgrades and extras.
- Interest on each payment, from the day you paid it to the day it's refunded.
The refund is due within 10 days. The builder may ask you to sign an acknowledgment of the amount, but it cannot make you sign a release of your legal claims to get your money. The HCRA's Advisory 11 says the same, and treats failing to return deposits with interest on time as misconduct.
How much interest will I get on my deposit?
| Type of home | Interest rate on refunded deposits |
|---|---|
| Condo, project with no sales before Jan 1, 2023, cancelled by the developer | Bank of Canada policy interest rate, reset every April 1 and October 1 (Condominium Act regulation) |
| Condo, older project or other refunds (such as cooling-off or material change) | Bank of Canada bank rate minus 2% |
| Freehold home | 2% below the Bank of Canada's minimum short-term lending rate on the termination date (Tarion freehold Addendum) |
The interest is a small consolation, not compensation. If you paid $100,000 in deposits over three years, interest won't cover how much home prices or mortgage rates moved while your money sat in trust. That's why the next two questions matter.
Can I sue for more than my deposit and interest?
It depends on two things: whether the cancellation was allowed, and what your APS says about damages.
- An invalid cancellation can be costly for the builder. In 13405176 Canada Inc. v. James Selkirk Custom Homes Ltd. (2026 ONSC 600), a builder cancelled two freehold lot sales because the plan of subdivision wasn't registered on time. That reason wasn't a permitted condition under the Tarion Addendum, so the court found the cancellation was a breach. The builder had resold the lots at a profit, and the buyers were awarded those profits, about $440,000.
- A "deposit-only" clause can limit what you recover. In Shiralian, the cancellation was late and a breach. But the APS had a clause limiting the buyers' remedy to their deposit plus interest. The Court of Appeal enforced it. The buyers had claimed $280,000 and got only their deposits back with interest.
The lesson: read the remedy and limitation-of-liability clauses before you're bound. For condos, you can still negotiate or walk away during the 10-day cooling-off period. Freehold buyers get their own 10-day cooling-off period on agreements signed from January 1, 2027.
What happens to my deposit if the builder goes bankrupt?
A bankruptcy or receivership is different from a cancellation. If the builder can't return your deposit, you can claim under Tarion's deposit protection:
| Home type | Tarion deposit protection | Other safeguards |
|---|---|---|
| Condo | Up to $20,000 | Deposits must be held in trust or secured under the Condominium Act, 1998 |
| Freehold, price up to $600,000 | Up to $60,000 | Register your purchase with Tarion within 45 days of signing |
| Freehold, price over $600,000 | 10% of the price, up to $100,000 | Register your purchase with Tarion within 45 days of signing |
Read our full guide to how pre-construction deposits are protected for the trust and insurance details.
What can the HCRA do about a builder that cancels unfairly?
The Home Construction Regulatory Authority (HCRA) licenses Ontario builders. Under its Advisory 11, a builder cannot:
- Cancel because you refused a price increase.
- Raise the price or add charges not in your APS without your consent.
- Threaten improper termination or pressure you.
- Require a release before returning your deposit.
The HCRA may review a cancelled project, and any re-launch of the same property, to see if the cancellation was legitimate. Since February 2023 it can impose administrative penalties of up to $50,000 per contravention, plus an amount equal to any financial benefit the builder gained. It can also suspend or revoke a licence. Condo contract terminations are disclosed in the HCRA's Ontario Builder Directory.
What should I do if my builder sends a cancellation notice?
- ☐ Don't sign anything yet, especially a release or a "mutual termination" agreement.
- ☐ Ask the builder which Tarion Addendum condition it relies on, and why it couldn't avoid termination.
- ☐ Check the date of the notice against the condition deadline in Schedule A.
- ☐ Confirm the refund amount, the interest calculation and the payment date (10 days).
- ☐ Send the notice and your APS to your real estate lawyer right away.
- ☐ Watch for a re-launch of the same project at higher prices. Tell your lawyer and the HCRA if it happens.
- ☐ If the deposit isn't returned, contact Tarion about a deposit claim.
How can I lower the risk before I sign?
- ☐ Look up the builder's licence, history and past terminations in the HCRA Ontario Builder Directory.
- ☐ Read Schedule A of the Tarion Addendum. Note every early termination condition and its date.
- ☐ Ask how many units have sold and whether construction financing is in place.
- ☐ Check whether zoning and site plan approvals are already done.
- ☐ Have your lawyer flag any clause that limits your remedy to "deposit plus interest."
- ☐ Use your cooling-off period to review everything, not just the price.
- ☐ Keep your deposit within Tarion's protection limits where you can, or confirm it's held in trust.
Related reading: 12 APS clauses to check before you sign · How to choose the best pre-construction project · The Ultimate Guide to Investing in Pre-Construction in Ontario
Frequently asked questions
How long does a builder have to return my deposit after cancelling?
Under the Tarion Addendum, the builder must refund all money you paid, with interest, within 10 days of termination.
Can a builder cancel because it didn't get a building permit?
No. The Tarion Addendum does not allow early termination conditions tied to a building permit, an occupancy permit, or completing the home.
Can the builder cancel and then resell my unit for more?
Not legally, unless a valid early termination condition applies. The HCRA reviews cancellations and re-launches. If a court finds the cancellation was invalid, you may be awarded damages, as the buyers were in the 2026 Selkirk case.
Do I have to sign a release to get my deposit back?
No. The Addendum and HCRA Advisory 11 both say a builder can't make a release a condition of refunding your deposit. It may ask you to acknowledge the amount received.
What if my builder asks for more money instead of cancelling?
You can say no. The builder can't add charges that aren't in your APS without your consent, and it can't cancel because you refused. Get legal advice before you agree to any amendment.
Is a cancelled project common in Ontario?
It is less common than delays, but it happens more in slow markets. GTA new condo sales have been at historic lows in 2025 and 2026, which puts pressure on sales and financing conditions. That's why checking those conditions before you sign matters.
About the author: Ola Otubu is a REALTOR® with Realty ONE Group Reveal, Real Estate Brokerage, and the founder of Buyprecon.ca. He represents buyers of new construction homes and condos across Ontario, from the first deposit through PDI, closing and warranty claims.
This article is general information, not legal advice. Rules, rates and protection limits change, and every APS is different. Have a real estate lawyer review your agreement and any cancellation notice. Last updated October 29, 2026.
Sources: HCRA Condominium and Freehold Addendums (Schedule A and refund sections); HCRA Advisory 11: Price Escalations and Contract Terminations; HCRA news release on administrative penalties (February 2023); Condominium Authority of Ontario: Pre-construction condos; Aird & Berlis: condominium deposit interest rate change (January 1, 2023); Shiralian v. Wyldewood Creek Inc., 2026 ONCA 163 (via Bridgepoint Law); 13405176 Canada Inc. v. James Selkirk Custom Homes Ltd., 2026 ONSC 600 (via Bob Aaron); Tarion deposit protection.
Worried your project could be cancelled?
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