3 Crucial Things to Know about Buying a Pre-Construction Condo
This is what you need to know about buying a pre-construction condo. And, always have your real estate lawyer involved in the process – it’s more complicated than it seems.
The 10-day cooling off period
As soon as you sign the offer, you should consult your real estate lawyer immediately.
Under Ontario law, you have ten (10) calendar days to “cool off”. This gives you an opportunity for sober second thought, and to consult with your lawyer and other advisors. During this period, you can ask the builder for amendments, or even terminate the deal without consequences.
Your lawyer is key to this process. The Agreement of Purchase and Sale is a complicated, lengthy document. Your lawyer will tell you exactly what you are buying. More importantly, your lawyer will tell you the rights the builder has under the deal. This might include the right to extend the construction time or closing dates, the right to vary the floor plan or substitute materials for equal or better quality.
Did you know that the builder has the right to cancel the entire project under the “economic viability” clause? If the builder’s construction costs rise too high, or their lender requirements change, then the project may no longer be economically viable, and subject to cancellation.
Here is a list of all the Toronto condo projects that were cancelled in 2019:
https://www.livabl.com/2020/01/here-all-toronto-condo-projects-stalled-2019.html
The disclosure documents
In addition to the offer, your real estate lawyer should also review the disclosure documents, including:
- Budget Statement
- Proposed Declarations
- Proposed Bylaws
- Proposed Management Agreement
- Proposed Rules
Does the building permit the use of cannabis? Are short-term rentals permitted under the by-laws?
If there are concerns here, talk with your lawyer right away.
Your Two Closing Dates
There are two (2) closing dates with pre-construction condos.
First, there is the occupancy date. This is the date you are allowed to move in. You do not receive title – you don’t own it yet! You are permitted to pay the builder a set rent fee (outlined in your Agreement of Purchase and Sale) until the condo is registered by the builder. 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.
Second, there is the final closing. This is the date on which you assume legal title and ownership of the unit.
It is crucial that you have your real estate lawyer review your pre-construction agreement of purchase and sale within the 10 day period. We are experts in reviewing and advising on these documents.
