Warnings When Purchasing A Condo From A Builder
1. SURPRISE CLOSING COSTS
- When purchasing a newly constructed condo, Builder’s Agreements often contain pages of fine print WHICH are not standard for each builder, as each builder has their own unique clauses.
- This is in contrast to the simplicity of a resale contract, which is often more straightforward and easily understood.
- The “adjustments” chargeable to the purchaser on closing can be substantial, with items included in the fine print that ultimately push the purchase price upwards
- Examples of builder adjustments that you may not initially consider include:
- The unit’s share of the building’s sewer connection charges
- Education and park levies, contributions and development charges or increases
- Added meter-related charges including connections, costs for meters and energization
- Initial reserve fund contribution
- Subway connection charge
- These adjustments may range from a few hundred dollars to thousands of dollars, and may result in a nasty surprise upon final closing!
2. ROOM SIZES AND SQUARE FOOTAGE
- When visiting Show Rooms for brand new condominiums, you may be dazzled by glossy brochures showing floor plans with various room dimensions and square footage…
- HOWEVER, the builder’s promotional advertising is not meaningful or binding, as the terms within the signed Agreement of Purchase and Sale are what determines the size of your purchased unit.
- If dimensions and square footage are not in writing within the terms of the Agreement, the contents of glossy brochures are meaningless, and verbal assurances by the builder’s sales representative will not help!
- It is wise to INSIST that the floor plan showing room dimensions and square footage be inserted in the Agreement before it is signed by the buyer.
3. DOES A BUYER GET INTEREST ON DEPOSITS WHEN BUYING FROM A CONDO BUILDER?
- Section 82 of the Condominium Act states that the builder MUST pay the buyer interest on all deposits paid BEFORE the interim occupancy closing, and only up to such occupancy date.
- The prescribed rate of interest referred to in section 82(1) of the Condo Act is defined as 2% per annum BELOW the Bank of Canada overnight bank rate, which has been less than 2% for years.
- THEREFORE money on deposit with a builder is NOT earning ANY interest.
- In fact, money on deposit with a builder going back to December 9, 2008 earned ZERO interest, since that is the date that the Bank of Canada overnight rate dropped from 2.25% to 1.5%, and it has remained below 2% since.