What you need to know about buying a pre-construction condo
Buying a pre-construction condo is more complicated than it first seems. The easy part is what feels like the hardest — finding a condo that you love at a price you can afford.
Sure, you may have looked at dozens of plans in a number of buildings to find the one that’s right for you. But, it’s only when you sign the deal that things really get started.
The 10-day cooling off period
The first thing to do after signing the offer is to take it to your real estate lawyer right away. Don’t wait. In Ontario, you have 10 calendar days to ‘cool off’ to make sure that you didn’t sign the contract with stars in your eyes. These 10 days are your chance to ask for amendments or even back out of the deal without penalty, so don’t waste them because once time expires, the deal is firm. So, ask your lawyer lots of questions and make sure that you understand the answers.
You need to know exactly what you’re buying. And, more importantly, you need to know exactly what the contract gives your builder the right to do.
What you saw and agreed to may not be exactly what you get. Your signed offer may give the builder the right to:
- Substitute materials of equal or better quality at any time.
- Install bulkheads where you least expect them.
- Vary the layout.
- Reverse the floor plan.
- Change the colours, textures or materials used.
- Extend the closing dates for lengthy periods of time.
One of the trickier clauses that may be found in the offer is the one that allows the builder to cancel the construction of the entire project and void all contracts based on their perception of ‘economic viability.’
The disclosure documents
Another important set of documents to review before it’s too late is that great big pile you received when you signed the deal. There’s a lot of information to digest and your real estate lawyer can explain how to read and understand all of these essential documents. They often include:
- Budget Statement
- Proposed Declarations
- Proposed Bylaws
- Proposed Management Agreement
- Proposed Rules
Once you get through all of these documents, go ahead and request any changes you deem necessary. Then you can firm up your deal. Moving forward, when you receive a notice from the builder about a delay, forward it to your lawyer. If you have a concern about what’s going on, ask your lawyer.
The interim occupancy period
Finally, one point that is often overlooked with new-build condos, is there are two closing dates. The first is the occupancy date; this is the day you are allowed to move in. It is not the day that you own your condo and the title is turned over to you; it is simply the date that you are allowed to start living there — and pay money to the builder for the right to do so.
Until the condo is registered, you have to pay rent every month for the right to live there. This ‘rent’ consists of the interest on the unpaid balance of the purchase price, a share of common expenses and your estimated monthly property taxes. None of these monthly payments go towards paying down the cost of your condo.
The second closing is the final one. This is where you actually take ownership of the property and the title is transferred to you. Only then do your ‘rent’ payments end, the balance of your purchase price can be paid and you can live happily ever after in your new home.