Glossary of Building Terms

Every business has its jargon and the building business is no exception. HHHBA presents this list of common building terms, and their definitions, to help you communicate effectively with your builder.

Please note that the following definitions are not legal definitions; they are simply provided to enhance your understanding of what may be involved in your house purchase.

Agreement of Purchase and Sale (APS) - A written document in which the purchaser agrees to buy certain real estate and the seller agrees to sell under stated terms and conditions.

Agreement for Sale - An agreement for the purchase of property in which the purchase price is paid in installments and title is not conveyed to the purchaser until the purchase price is paid in full.

Building codes - The regulations established by local/provincial governments providing the structural requirements for building.

Closing - This term is also referred to as settlement. Closing or settlement is the time at which the property is formally sold and transferred from the seller to the buyer; it is at this time that the borrower takes on the loan obligation, pays all closing costs, and receives title from the seller.

Closing costs - These are customary costs above and beyond the sale price of the property that must be paid to cover the transfer of ownership at closing; these costs generally vary by geographic location and are typically detailed to the borrower after submission of a loan application.

Condition/contingency - A condition that must be satisfied before a contract is binding. For instance, a sales agreement may be contingent upon the buyer obtaining financing.

Condominium - A form of ownership in which individuals purchase and own a unit of housing in a multi-unit complex; the owner is required to pay a monthly fee for the upkeep of common elements. Common elements are the areas shared by residents, such as lobbies, parking garages, and recreational facilities such as pools and gyms. Condominium projects can include high-rise buildings, low-rise buildings, townhouses, semi-detached homes and detached homes.

Custom/contract homes - A custom or contract home is usually a freehold home that is custom-built to include features specified by the purchaser. A custom or contract home is not always covered under warranty. If the home is built from the foundation to the finished stage by a builder, the home is likely eligible for warranty coverage. However, the warranty will not apply if you complete major components such as plumbing, electrical and/or heating on your own, or if you hire one company to construct the foundation and another company to construct the house.

10-day cooling off period - This involves the buyer's right to cancel the Agreement of Purchase and Sale up to 10 days after the Agreement is returned to the buyer from the builder. This applies to the purchase of a condominium only. The purpose of the 10-day cooling off period is to give consumers time to consider the implications of their offer to purchase.

Delayed closing protection for a freehold home - If a freehold home is delayed beyond five days without the builder providing proper written notice to the purchaser, or if the delay is beyond 120 days for any reason, the homeowner may be entitled to compensation.

Deposit protection - New home buyers in Ontario are protected against loss of deposits up to $40,000 should the sale of their home not be completed through no fault of their own. This applies to freehold and contract home buyers who signed an Agreement of Purchase and Sale (APS) on or after February 1, 2003. Buyers who signed an APS before February 1, 2003, are covered for up to $20,000.

Down payment - The portion of the house price the buyer must pay up front from personal resources, before securing a mortgage. It generally ranges from five to 25% of the purchase price.

Freehold homes - A freehold home is a fully-detached, semi-detached or townhouse dwelling that is entirely owned by the purchaser. All maintenance (indoors and out) is the sole responsibility of the owner and no monthly maintenance fees are required.

Land transfer tax - This is the payment to the provincial government for transferring property from the seller to the buyer.

Offer and Acceptance - The basic requisite of any contract is a proposal by one party, called the offeror, to another party, called the offeree, to accept the basic terms of the agreement. If the offeree agrees to the proposal, there is an acceptance and the contract will bind both parties to its terms.

Ontario New Home Warranties Plan Act - The Ontario New Home Warranties Plan Act is administered by Tarion Warranty Corporation. It is designed to protect consumers buying new homes by ensuring they get a quality home. All builders in Ontario must enroll every home in the program.

PDI - Pre-delivery inspection. Before you take possession of your new home or condominium, your builder is required to conduct a pre-delivery inspection, or PDI, with you. During the PDI, it is very important to identify any items that are damaged, missing, incomplete or not operating properly. To learn more about PDIs, please click here.

PITI - Principal, interest, taxes and insurance. Together, these are the four elements of a monthly mortgage payment.

Tarion Warranty Corporation - This is a private corporation set up by the provincial government to regulate the home building industry in Ontario. Tarion licenses all new home and condominium builders in the province and ensures that all homeowners receive the new home warranty coverage they are entitled to by law.

Townhouse - A house that is attached to one or more other houses, but which sits directly on a lot of land that you also own (if you don't own the land, it is a condominium). Townhouses can range from duplexes and triplexes to large townhouse communities consisting of hundreds of similar homes.

Zoning regulations -These are strict guidelines set by municipal governments regulating how a property may or may not be used.

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