Most builder condominium agreements look the same and are, in general, very one-sided in favour of the builder. Builders can delay closings, change the layout or finishing’s and have 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. If you are buying a freehold home, you do not have a 10-day cooling-off period, but you can still make your agreement conditional on lawyer approval. When buyers come to me to review their agreement, here are the main lessons I explain to them to consider in making their decision whether to go ahead or cancel the agreement:
1. Have You Seen Other Projects Completed by this Builder/Developer
When you visit other completed projects, you can ask the buyers whether their unit was completed on time, whether they were given what they were promised and did the builder complete all deficiencies in a timely manner. This applies to all condominiums and freehold builders.
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. 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 may limit your right to advertise the unit for sale on any MLS system, but it is still better to have this right written in right away. In my experience, it is easier to negotiate this right in a new condominium purchase. It is not as easy as a freehold purchase.
3. What Are the Additional Charges?
The purchase price you pay includes HST, but there are other additional charges specified in your agreement. You must understand these charges as they will have to be paid at the final closing and sometimes add thousands of dollars to the final amount. Many builders will put a cap on these charges at the sales office 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 condominium 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 have the income stream to pay the rent you will owe to the builder during the occupancy period.
If you do the proper research and ask the right questions when you sign with a builder, you will avoid problems later and be part of a successful closing.
If you have any questions about your new home agreement, please contact me at [email protected]