What You Should Know About Buying a Pre-construction Condo

4 phases in buying new condominiums:Condo Floor Plan

  1. Pre-construction phase
    -     Signing your Agreement
    - Providing deposits
    - Receive Condominium Disclosure Statement (Condo Docs)
  2. Construction phase
    -     Colour & upgrade selection
  3. Interim Occupancy Period
    -     Pre-delivery inspection
    - Occupancy fees
  4. Title Transfer (Final Closing)
    -     Deed to property
    - Mortgage starts

Deposits

  • Held "in trust" by developer's lawyer
  • Deposits are fully insured
  • Interest is paid from date of deposit to occupancy at a prescribed rate
  • NSF cheques are subject to administrative fee

assignment clauseTitle

  • Can be assigned to immediate family without penalty
  • Assignment Clause required for non-family, but assignee remains responsible for closing on unit if assignor defaults

HST

  • Included in the purchase price if you are an owner-occupant
  • Investors are responsible for paying rebate portion on final closing, but can apply to CRA for full refund of rebate after leasing unit for 1 year


Condominium Disclosure Statement Includes:

  • Disclosure Statement
  • Budget Statement for Year 1 operations
  • Proposed Declaration Proposed By-laws Proposed Rules
  • Proposed Management Agreement
  • Preliminary Draft Plan of Condominium (excluding parking levels)
  • Defines what items are considered part of your unit and what items are considered part of the common elements
  • Defines how common element fees (maintenance fees) are calculated
  • Names the Property management company for Year 1
  • Details how the condominium corporation is to operate and make decisions

Finishes and Colour SelectionsCondo Finishes

  • Developer has right to substitute materials of equal or better quality as materials may become discontinued from time of pre-sales to construction
  • Colour selections typically start 12 months prior to occupancy
  • Upgrades and pricing are usually not available until colour selection time as availability of materials and pricing at time of pre-sales may change by the time construction commences
  • Upgrades are usually payable 100% at time of selection

Occupancy Dates

  • Tarion Addendum on Statement of Critical Dates details rules governing occupancy dates
  • When you purchase pre-construction, your Agreement will contain First Tentative Occupancy Dates
  • Developer may set subsequent Tentative Occupancy Date(s) providing written notice no later than 90 days before the existing Tentative Occupancy Date
  • Developer must provide a Final Tentative Occupancy Date no later than 30 days after completion of the roof slab
  • Addendum also provides the Outside Occupancy Date and remedies if occupancy does not occur by this date

Interim Occupancy Period

  • Period between possession of the unit (occupancy) and title transfer date (final closing) when your mortgage kicks in and you become the legal owner
  • Occupancy Fee is payable to Seller during this period, calculated as:
  • Interest in unpaid balance of purchase price, plus
  • Estimated municipal realty taxes
  • Common expenses (maintenance fees)
  • Occupancy fee does not go towards your mortgage
  • Occupancy period varies, but typically 3-6 months
  • You cannot lease your unit during occupancy period, unless you have signed an Authorization to lease with the developer

Tarion Warranty CorporationTarion Warranty

  • All new home builders are required to be registered with Tarion Warranty Corporation
  • All new homes protected under Ontario New Home warranties Act includes protection for deposits, workmanship and delays
  • 1 year warranty: units to be constructed in workmanlike manner and free from defects in materials
  • 2 year warranty: covers water penetration of building envelope; electrical, plumbing and heating systems; and exterior cladding
  • 7 year warranty: covers major structural defects
  • All deficiencies documented at Pre-Delivery Inspection (POl) on Tarion Certificate of Completion and Possession form

Condo Closing Costs ReviewClosing Costs

  • Land transfer tax= Ontario + Toronto
  • Adjustments, which are determined at Title Transfer Date (final closing), but may be "capped" if requested
  • Adjustments Include:
  • Realty taxes estimated from Occupancy to Title Transfer Date
  • PST on chattels (i.e. appliances)
  • New taxes imposed by government
  • Increase in development and/or education development charges
  • Tarion Warranty Corporation enrolment fee
  • Park levies Imposed by government utility meters and connection charges HST (if non-owner occupant)
  • Legal fees