Buying condo from a Builder...Watch out!!

When purchasing from a builder, often buyers are not aware of the restrictions and hidden costs beyond the purchase price. In a hot market when units sell out so fast, buyers have very little say in negotiating the Purchase Agreement. In any event, buyers should be aware of liabilities and extra as set out in the Agreement, and should have their own real estate representative present when the contract is signed and a legal representative review the Contract before the end of the cooling period. The cooling period is 10 days.

Here is a typical [but not exhaustive] list of what buyers should watch out for:

• In addition to the Purchase Price, the buyer is required to pay for a number of items as "adjustments on closing subject to applicable taxes. For example, reserve fund and common expenses contributions, the buyer's unit's proportionate share for the utilities expenses, share of realty taxes, levies and development charges, administrative fees, security deposit for assuming hydro or monitoring contract...and the list goes on...It is a good idea to try and confirm the amounts of any of the adjustments with the Builder directly in the Offer should it be possible to "delete" or "capped".
• The Ontario Tarion Addendum sets out the Vendor's right to extend the closing date. Buyers should review it carefully. The Agreement will have a tentative occupancy date, and the vendor may extend the Occupancy Date TWICE for as many times as it needs within a notice period. If this occurs, the second amended date becomes the "Firm Occupancy Date". Furthermore, if the Vendor does not provide 90 days notice for the extension, then the tentative Occupancy Date becomes the "Firm Occupancy Date".
• The vendor reserves the right to substitute materials for those designated in the plans and/or specifications provided the quality is equal or better, and the Purchaser is advised that in the manufacture of finishing items, colour variances sometimes occur, and to alter the plans and specifications from the images of plans chosen by the Purchaser. If there are any details or specifications that the Purchaser do not want the Vendor to have the right to change, this should be specifically mentioned.
• Dimensions of Units are approximate.
• The Purchaser is required to take occupancy on the Confirmed Occupancy Date provided the unit is substantially complete.
• If the Purchaser intend to purchase the Unit as an Investment/Income Property, the Vendor can impose an additional charge to the Purchaser on closing.
• Often times, the Purchaser is prohibited from selling directly or indirectly his interest pursuant to the Agreement, or leasing the unit during the period prior to the unit being transferred to the Purchaser without consent by the Builder.