Purchasing a Pre-Construction Condominium

PURCHASING A PRE-CONSTRUCTION CONDO

A pre-construction condo is a building or unit that is for sale, but has not yet been completed. There are numerous advantages to buying pre-construction, but doing so requires delayed gratification. For the most part, the process is similar to that of a resale purchase, though there are some marked differences. These are the key factors we advise you to be aware o f.

1 HST is usually included in the sales price of apre-construction condo, but we always advise you confirm this before signing any documents.

2 After signing a purchase contract and presenting a cheque, your transaction will be subject to a10-day cooling off period. During this time, you should reassessyour financial status and commitment to making the purchase. If you change your mind, you are permitted to void the agreement without penalty.

3 Pre-construction purchases require a staggered down payment that’s collected over the course of approximately ayear and a half. Post-dated cheques can be given to the builder at the time of sale or at the end of the cooling period. Proof of mortgage preapproval must also be provided at this time.

4 When you sign purchase agreement, make sure you receive a copy of the agreement and the condo disclosure, which details the budget for the first year and the common expenses allocation. We advise you have a lawyer review these documents to explain the costs and clauses outlined by the agreement. 5 The closing costs of a pre-construction sale are usually higher than a resale transaction, and it’s important to understand this before signing your agreement. The reason per-construction closing costs tend to be higher is because of the costs associated with new developments, including:

Utility costs

Land development fees / Park Levies

Education levies

Tarion warranty

Lawyer fees

Status Certificate

Hydro meter installation

HST on chattels, etc.

Mortgage discharge (Builders)

In some cases, builders will cap these variable amounts. We advise you attempt to negotiate to have costs capped, as doing so may save you money, and will definitely give you peace o fmind.

6 Developers determine the occupancy date –the day you can can either move in or rent out your unit. The unit is usually complete by this time, but common areas,like hallways and shared amenities may not be. It is common for work to continue in these areas for an additional 9-12months.

7 Every purchase agreement will have either a confirmed or tentative occupancy date. In cases of atentative date, the builder must inform the purchaser of the occupancy date no later than 30 days after roof assembly is complete (or another predetermined construction phase). If the purchaser is not

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given notice of the confirmed occupancy date at least90 days before the tentative occupancy date, then the tentative date automatically becomes the confirmed date. Be aware of whether the date you’re given is tentative or confirmed so you understand your rights in the event of a delay. Also be aware that builders will not compensate purchasers for delayscaused by events beyond their control, such as weather events or a labour strike.

8 When the unit a pre-delivery isready to inspection be occupied, (PDI) will be arranged. A representative of the builder will walk you through the unit to identify any deficienciesthat should be addressed prior to you moving in. Ifthese deficiencies are not fixed prior to your move, you will be provided with a form to sharewith the developerand with Tarion. 9 During owners the are occupancy phase,condo required to pay occupancy fees.Thesefees are comprised of interest only payments on the outstanding amount due (original purchaseprice –down payment), usuallyat the posted BoC rate + condo fees+ estimated property taxes.Thisperiod usually lasts approximately 6-12months.

Once the building is completed and registered,your mortgage payments will replace to the interest only condo fees.You will alsoreceivethe title to the unit and pay all outstanding closing costs.

Condo fees are usually inexpensive the first year, but will increasethereafter. Thisis because the condo board will have to begin maintaining new features,and the cost of utilities will increasefor a fully occupied building.

Ifyou areconsidering a pre-construction condo, or are alreadymidway through the purchasing process,contact us with your questions. We’re happy to help explain the fees,requirements and timelines involved.

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TAXES, WARRANTIES AND PROPERTY VALUES

Paying taxes and providing warranties for unbuilt properties is a unique exercise not applicable to resale transactions. Here, we outline some of the key elements you should be aware of. We also examine how the value of a unit is determined before it even exists, and provide tips on how to save.

Property taxes

and ensure you’re getting precisely what you want.

You are required to pay property taxes for Value 2: Get in early pre-construction purchases. However, because Once a condominium is 70%-75%sold out, the total cost of your transaction is as yet builders usually increase the price of the undetermined, the taxes you pay are estimates, remaining units by 5%-10%.Getting your unit and will eventually be adjusted when the early is the best way to avoid paying a municipality provides a final assessment.In higher fee. many cases, this assessment will yield a refund. Value 3: Occupancy (not registered) sales Tarion Warranty Corporation Applicable to investors looking to flip a Tarion is the name to know when buying unit, the sale can only be considered an pre-con. This organization administers the “assignment,” as most builders restrict the sale Ontario New Home Warranties Plan Act, of units during this time. Some developers which outlines the protection requirements outright forbid this type of sale,but if not, that condo builders must provide, by law, to you can resell a unit without paying the buyers. The overarching protection offered by closing costs. Tarion includes financial redress in the event a building is cancelled, severely delayed or Value 4: Registered sales completed without meeting key specifications. Once the building has been registered it can Buying & selling variables be offered as a resale property on the market, through the MLS system. open Value 1: Agents preview Value 5: Year after registration Select real estate agents gain access to new developments before they are made available to the public (called VIP agents preview). Even though you can sell a new unit immediately after registration, it is better often These units are usually cheaper, and afford to wait a year. This gives time for other sellers buyers greater customization –floor plans, to unload their units, which translates to less directional view, storey, etc. Buying one of competition within the building. these units is a terrific way to both save money

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