5 Things to Remember When Buying a New Home From a Builder
By Mark Weisleder
Most builder agreements look the same and are in general very one-sided in favour of the builder. Builders have the ability to delay closings, change the layout or finishings and hold the right to cancel agreements under certain circumstances, with very little recourse for buyers. In Ontario, buyers of new condominium units have 10 days from signing their agreement to change their minds for any reason. Below are the main lessons I explain to buyers who come to me to review their agreement and help them decide whether to go ahead or cancel their agreement:
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1. Have you seen other projects completed by this builder or developer?
When you visit other completed projects, you can just ask the buyers whether their unit was completed on time, whether they were given what they were promised and if the builder completed all deficiencies in a timely manner.
2. Do you have the right to assign your unit before occupancy or final closing?
Condominium projects can take several years to be completed. Buyer circumstances may change and while they may have initially planned to move into the unit, they may in some cases need to sell their agreement to someone else. Or a buyer may just want to sell early to make a profit. Many builders will provide a limited right to assign the agreement as an incentive when you sign your agreement. This usually will require a fee and is based on the builder already selling more than 90% of the units. It may also limit your right to advertise the unit for sale on any MLS system or may state that if you assign, some of the incentives you received will not apply to a new buyer. This is why you need to understand any right of assignment completely before the agreement becomes firm.
3. What are the additional charges?
The purchase price you pay includes HST, but there are other additional charges specified in your agreement. It is very important that you understand these charges as they will have to be paid at final closing, and can sometimes add tens of thousands of dollars to the final amount owing. Many builders will put a cap on some of these charges at the sales office as an incentive, to give you a better idea right away as to what the total additional charges will be at closing.
4. Will you be able to rent the unit out at occupancy?
Many builder agreements do not permit you to do this. If you are buying your unit as an investment, you will want to include an ability to be able to rent the unit out once you are given occupancy of the unit, which can be 8-12 months before the building is registered. Without this, you may not have the income stream to pay the rent you will owe to the builder during the occupancy period.
5. Will your building permit pets or AirBNB
Make sure you understand the rules in your new condominium, which will be part of the condominium documents given to you when you sign the agreement. These will contain provisions as to whether for example, there is a weight restriction on any pet, the number of pets permitted and whether the building will permit short-term leases or Air BNB.
At RealEstateLawyers.ca LLP, we do every part of a transaction safely, whether it is signing documents through a video conference, transferring funds to our trust account digitally through a bill payment and arranging lockboxes on closing for the keys. If you have any questions about any pre-construction contract or need assistance closing any real estate agreement, please contact me at email@example.com or toll-free at 1-888-876-5529
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