Buying a brand new condominium from a builder is quite different from buying a resale condominium. This column will identify some of the unique aspects of buying a brand new condominium from a builder.
When you buy a brand new condominium from a builder, you as a purchaser have a statutory ten (10) day cooling off period which typically starts from when the Agreement of Purchase and Sale was accepted. During this conditional period, you should read both the Agreement of Purchase and Sale and the disclosure statement. I always recommend that you have an experienced real estate lawyer review the Agreement of Purchase and Sale. Your lawyer may advise you of the builder’s additional closing costs and may be able to negotiate caps or limits on these costs which can amount to thousands of dollars on the final closing date.
When you buy a brand new condominium from the builder, there are typically two (2) closing dates. The first closing date is called the interim or occupancy closing date. On this closing date, you will receive the keys to the property and be permitted to occupy the property. During the occupancy period, you will be required to pay the builder monthly occupancy fees in the form of post-dated cheques. The interim occupancy fees will be comprised of three (3) parts which are the estimated monthly common expenses, the estimated property taxes and interest on the balance of the unpaid balance of the purchase price .
Many purchasers have difficulty understanding how the monthly occupancy fees are calculated. The builder will estimate both the monthly common expenses and property taxes. The interest rate on the unpaid balance of the purchase price is prescribed by law under the Condominium Act. It is usually tied to the prime bank rate prior to the interim closing date.
Monthly occupancy fees will be payable until the final closing date. The final closing date will take place when the builder registers the declaration of the condominium. This typically occurs 6-12 months following interim closing, however, it may take longer. On the final closing date, you will need to arrange your mortgage as you will be required to pay the builder the balance owing together with builder adjustments and the applicable land transfer tax. On the final closing date, you will receive title to and will become the registered owner of the property and will begin paying your mortgage. You will no longer be paying any occupancy fees after the final closing date.
There are many other important points that you will need to understand if you are considering the purchase of a brand new condominium from a builder. Again, it is important to retain an experienced lawyer early in the process so that you understand the process and your rights.