How it works
A condo agreement of purchase and sale (APS) sets a deposit schedule: an initial deposit on signing, then instalments over the following months. A purchaser deposit bond stands in for part of those instalments. The buyer pays the early deposits in cash, and the bond covers the rest until the date the APS sets, often interim occupancy.
If the buyer defaults, the surety pays the developer the bonded amount and recovers from the buyer. When the bond term ends, the buyer replaces the bond with cash.
An example deposit schedule
Every facility sets its own split. This example shows the shape of one:
| When | Deposit | Paid by |
|---|---|---|
| On signing | Initial deposit | Purchaser, in cash |
| 30 days | Balance to 5% of the price | Purchaser, in cash |
| 120 days | Next 5% | Deposit bond |
| 360 days | Next 5% | Deposit bond |
| Interim occupancy | Next 5% | Deposit bond, then replaced with cash |
| Final closing | Balance of the price | Purchaser |
In this example the bond covers up to 15% of the price, and the buyer replaces it with cash at interim occupancy.
Why developers offer it
- Construction lenders often set a presale target before they fund. Bonded deposits can help a project reach it.
- Buyers who can defer deposits may commit sooner.
- The developer still holds security for the full deposit schedule.
Why buyers use it
- They keep money invested instead of selling investments to fund later instalments.
- Deposits held in trust earn interest only at the rate set under the Condominium Act.
- They replace the bond with cash when the bond term ends.
How long the bond runs
The deposit schedule and the project's milestones set the term. A bond can run about 180 days, to the start of construction, or as long as three years, to interim occupancy.
Two layers of underwriting
The developer applies for a facility for the project. The surety reviews the developer, the project and the deposit structure, then sets the terms: the bonded portion, the bond term, how premium is paid and how many bonds are available.
Each buyer who wants a bond then applies under the facility. The surety reviews that buyer and decides on each application.
Every bond is subject to underwriting. Nothing on this page is a commitment to issue a facility or a bond.
What each buyer sends
- A completed application and indemnity agreement.
- A copy of the APS for the unit.
- Statements showing liquid investments: cash, stocks, mutual funds, RRSPs.
- A current tax bill for any real estate owned.
- Confirmation of income and employment.
- Proof of identity.
- Mortgage approval for the unit, if the buyer needs a mortgage.
Same project, more security? Developers often need a Tarion bond and excess deposit security on the same project. Send them together.
