Key Legal Considerations Before Buying a New Condo From a Builder
By Mark Weisleder
Most builder condominium agreements look the same and are, generally speaking, written in favour of the builder. Builders can delay closings, change layouts and finishings, and have rights to cancel agreements under certain circumstances, with little recourse for buyers. In Ontario, buyers of new condominiums have 10 days from signing to change their minds for any reason. When buyers come to me with an Agreement, here are the key considerations I raise to help them make an informed decision to proceed with or cancel the Agreement:
1. Have you seen other projects completed by this builder?
When you visit other completed projects, you can simply ask the buyers whether their unit was completed on time, whether they were given what was promised, and whether the builder completed all deficiencies in a timely manner.
2. Do you have the right to assign your unit before occupancy or closing?
Condominium projects can take several years to complete. Buyer circumstances change and, while they may initially plan to move into the unit, they may also find that they need to sell their Agreement. Many builders will provide a limited right to assign the agreement as an incentive. This will usually require a fee, and may limit your right to advertise the unit for sale on an MLS system, but it is better to have this right written in from the outset.
3. What are the additional charges?
The purchase price includes HST, but there are 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 add thousands of dollars to the amount owing. Many builders will put a cap on these charges from the beginning to give you a better idea as to what the total additional charges will be at closing.
4. Will you be able to rent the unit at occupancy?
Many builder agreements do not permit this. If you are buying a unit as an investment, you will want to include an ability to rent the unit out once you are given occupancy, which can be 8 to 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 the building permit pets or AirBNB?
Be sure to understand the rules of your new condominium, which will be part of the condominium documents given when you sign the Agreement. These will contain provisions as to whether, for example, there are weight restrictions on pets, the number of pets allowed, and whether the building will permit short-term leases or AirBNB.
If you do the research, work with an experienced real estate brokerage, and ask the right questions when you sign with a builder, you will avoid problems and be part of a successful closing.
Mark Weisleder is a Senior Partner, author and speaker at the law firm Real Estate Lawyers.ca LLP. mark@realestatelawyers.ca / 1-888-876-5529
