New condo purchases can bring closing day surprises
Hiring a lawyer can help buyers of newly constructed condos avoid
surprises when closing day arrives, says Toronto real estate lawyer
Purchasing a new build is a “completely different transaction” from a
resale and involves numerous extra steps and adjustments that many
ordinary consumers may simply be unaware of, says Bernstein, a lawyer
with Weltman Bernstein.
“All these extras and adjustments need to be pointed out to purchasers,” he tells AdvocateDaily.com.
The most potentially irritating difference comes on closing day, when
the final price may not match the amount on the first page of the
purchase agreement with the builder.
While resale purchase agreements tend to match the closing price —
barring some small changes to account for prepaid items such as
property taxes and maintenance fees — Bernstein explains that new units
include numerous price adjustments to pay for things like utility
connections, development levies, and Tarion fees.
“These charges could be as high as $10,000 or more,” Bernstein says.
“These extras are set out in the schedule to the purchase agreement but
unless purchasers read all the schedules they will be shocked on final
closing when all the adjustments are added to the price.”
The good news for buyers is that many of the added costs are negotiable.
“Depending on the demand for the project and the identity of the
builder, some of them can be deleted, but more likely capped.
Purchasers can choose to negotiate directly with the builder or through
their lawyers,” Bernstein says.
He says some people can also be tripped up by the fact that these deals
have an extra closing date compared with resales. The first, known as
the interim closing date, is when the purchaser takes possession of the
unit. The second, or final closing date, is when the actual money
changes hands. During the period between the two dates, a monthly
occupancy rent is paid to the builder, which covers the estimated
property tax, condo fees and interest on the purchase
Unlike resale closing dates, both the interim and final closing dates
for new builds can be extended without the consent of either party due
to the delays and uncertainty that come with construction deadlines.
Bernstein says prospective buyers also need to be told about HST, which is payable for new condos but not resales.
“The purchase price almost always includes the HST,” he says, noting
that it is charged at a lower rate than the usual 13 per cent “because
the builder assumes the buyer qualifies for the HST rebate for new
Those who don’t qualify, including anyone planning to rent or flip,
will have to reimburse the builder for the rebate amount, which depends
on the final purchase price, Bernstein says.
Luckily for consumers these transactions are conditional for 10 days, according to provincial legislation.
“That gives purchasers time to reconsider or have the agreement
reviewed by a lawyer,” Bernstein says. “Resale transactions have no
such legislated automatic review. If a purchaser wants to make his or
her deal conditional then it must be written into the contract.”
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