If a builder cancels your pre-construction condominium in Ontario, you will usually get back your deposit with interest at the prescribed rate. Whether you can also claim damages for the rise in the unit’s value depends largely on one clause in your agreement: the limitation of liability, or “exculpatory”, clause. In Shiralian v. Wyldewood Creek Inc., 2026 ONCA 163, released March 6, 2026, the Ontario Court of Appeal enforced that kind of clause even though the builder terminated after the deadline in the Tarion Addendum. The purchasers claimed $280,000 in damages on a $439,990 unit and recovered only their deposits plus interest. The time to deal with this clause is before you sign, or within the 10-day rescission period.
Key Takeaways
- Most Ontario pre-construction condo agreements contain a clause limiting the buyer’s remedy for the builder’s default to the return of deposits, plus interest.
- In Shiralian, the Court of Appeal upheld that clause even though the builder’s termination was late and was a breach of contract.
- The Tarion Addendum controls when and why a builder may terminate early, and guarantees the refund of deposits with interest. According to the courts, it says nothing about damages, and the parties can agree on what happens on default.
- The outcome turned on specific facts: experienced investor purchasers, their own lawyers, a negotiated agreement, a clause made “subject always to the Tarion Addendum”, and no finding of bad faith.
- Buyers who want more than deposit plus interest need to negotiate it, typically during the 10-day rescission period under the Condominium Act, 1998.
What happened in Shiralian
Three purchasers signed an agreement in January 2020 to buy a unit to be built in Collingwood for $439,990. They bought it together as an investment property to rent out.
The Tarion Addendum in their agreement allowed the builder to terminate if it could not obtain construction financing. The original deadline for that condition was November 30, 2020. The first tentative occupancy date was November 1, 2021. Under the Addendum, a condition deadline can be extended by agreement, but it must fall at least 90 days before the first tentative occupancy date. Otherwise it is deemed to be that date. Here, that meant August 1, 2021.
The project ran into COVID-19 delays, and the Town of Collingwood then passed an interim control by-law freezing building permits over water supply concerns. In June 2021, two of the purchasers signed an amendment extending the financing condition to November 30, 2021, but the amendment did not move the occupancy date. On November 29, 2021, the builder cancelled.
The Superior Court (2025 ONSC 2666) found that, because of the 90-day deeming rule, the financing condition had expired on August 1, 2021, so the cancellation was late and was a breach of contract. The court also found the purchasers were partners, so the two who signed the amendment bound the third, who had not signed it.
Even so, the purchasers recovered only their deposits and the statutory interest. The agreement said that the purchaser’s remedies for any default by the vendor were “limited solely to the return of the deposits”, and that the purchaser had no claim for economic loss or expectation damages. The Court of Appeal dismissed the appeal and awarded the builder $25,000 in costs.
Why the clause was enforced
The courts applied the three-step test from the Supreme Court of Canada in Tercon Contractors Ltd. v. British Columbia, 2010 SCC 4:
- Does the clause, properly interpreted, apply to what happened?
- If so, was it unconscionable when the agreement was made?
- If not, is there an overriding public policy reason not to enforce it?
The Court of Appeal had already upheld a similar clause in Ritchie v. Castlepoint Greybrook Sterling Inc. (2020 ONSC 3840, aff’d 2021 ONCA 214). In Shiralian, the court added several points:
- The Addendum does not deal with damages. It sets termination conditions, deadlines and the refund of deposits with interest. It does not say what damages flow from a builder’s breach, and it expressly allows the parties to make other termination arrangements.
- This was not a standard-form contract. The purchasers were experienced in real estate and had negotiated significant changes through their lawyers. The builder did not have to point the clause out to them.
- Interest was still payable. The court read the clause together with the agreement’s own promise to pay interest on deposits under section 82 of the Condominium Act, 1998 and with paragraph 11 of the Addendum. The purchasers got their deposits and the interest.
- The Tercon test is the safeguard. The court rejected the argument that enforcing the clause would let builders ignore Addendum deadlines without consequence, because each case is still assessed on its own facts.
The limits of the decision
In his paper for the 2026 OBA Ontario Legal Conference, Harry Herskowitz of DelZotto, Zorzi LLP criticized the result as one-sided in a rising market: a late cancellation ends up with the same consequence for the builder as a timely one, and the buyer loses the appreciation. He also identified the facts that shaped the ruling and suggested that other facts could produce a different result:
- Unsophisticated buyers. In his view, first-time buyers who signed the builder’s unamended form without legal advice could be in a materially different position on unconscionability. That doctrine, as restated in Uber Technologies Inc. v. Heller, 2020 SCC 16, requires both an inequality of bargaining power and an improvident bargain.
- A clause that cuts below the statutory minimum. A clause that denied statutory interest, let the builder keep part of the deposit, or required a release before refunding money (which paragraph 11 of the Addendum prohibits) would, in his view, be expected to fail.
- Bad faith. Neither Ritchie nor Shiralian involved a builder cancelling on a pretext to resell the units at higher prices. He suggested that evidence of bad faith, engaging the duty of honest performance from Bhasin v. Hrynew, 2014 SCC 71, could lead a court elsewhere.
These are the author’s views about future cases, not holdings of the court. They do not mean an unrepresented buyer will win.
What buyers can do
Before you sign or during the rescission period
Section 73 of the Condominium Act, 1998 lets a buyer rescind an agreement for a new unit by written notice that the builder or its lawyer must receive within 10 days of the latest of receiving the disclosure statement, the condominium guide, and a copy of the agreement signed by both sides. The builder must then refund the money with interest at the prescribed rate. In practice, those 10 days are when your lawyer reviews the agreement and when you have the most leverage.
The OLC paper suggested that purchasers’ lawyers try to negotiate:
- a carve-out removing the builder’s own default from the limitation clause; or
- a fixed amount payable by the builder on a wrongful termination, drafted as a genuine pre-estimate of damages so that it is not struck down as a penalty.
Builders may refuse, and in a strong market they often do. The paper’s point was that in a soft market, buyers have more room to ask.
If you have already signed
- Read the limitation clause and the Tarion Addendum together, especially the early termination conditions and their deadlines.
- Check every amendment the builder asks you to sign against the critical dates, including the 90-day rule.
- Keep every notice the builder sends. Dates matter.
- If the builder cancels, confirm that you receive the full deposit, money paid for extras and upgrades, and interest. The Addendum prohibits making you sign a release to get your money back.
Newcomers and investors
Many newcomers buy pre-construction units, sometimes years before they arrive or before their status is settled. If you are signing from abroad, make sure someone reviews the agreement inside the 10-day window. The deposit-only clause also matters for anyone relying on new home HST rebates or a planned closing date, because a cancellation unwinds both.
Frequently Asked Questions
My builder cancelled my condo. Do I get my deposit back?
Generally yes. The Tarion Addendum requires the refund of deposits, including money paid for extras or upgrades, with interest at the prescribed rate, when an agreement is terminated other than for the buyer’s breach. The builder cannot require a release as a condition of the refund.
Can I sue for the increase in the unit’s value?
That depends on your agreement. If it contains a deposit-plus-interest limitation clause like the one in Shiralian, the Court of Appeal has said it can be enforced, even when the builder’s termination was late. Facts such as bad faith, a clause that undercuts the statutory protections, or a vulnerable unrepresented buyer may be argued differently.
Does the Tarion Addendum protect me from a late cancellation?
It sets the deadlines, and a late termination can be a breach of contract, as it was in Shiralian. But according to the courts, the Addendum does not set the damages for that breach, so the limitation clause in your agreement may decide what you recover.
How long do I have to back out of a new condo agreement?
Under section 73 of the Condominium Act, 1998, the builder or its lawyer must receive your written notice within 10 days of the latest of receiving the disclosure statement, the condominium guide, and a copy of the agreement signed by both parties.
For the rest of the purchase process, see our step-by-step guide to buying property in Ontario, our guide to new home HST rebates in 2026, and our notes on buying as a non-resident.
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Disclaimer: This article is for general information only and is not legal advice. Ontario real estate, tax and estates law change frequently, and every matter turns on its own facts. Reading this article does not create a lawyer–client relationship. Obtain advice tailored to your situation before you act.
Talk to an Ontario lawyer. BridgePoint Law advises individuals and businesses across Canada — and on Canada–US–China cross-border matters — on pre-construction condominium agreements and Ontario real estate closings. Book a consultation with our team in Toronto and Kingston. We work in English, Mandarin, and Cantonese.
