Purchasing a new construction condo unit comes with its own unique concerns. Here are a couple of things to know when considering your options and reviewing your Agreement of Purchase and Sale:
1. Construction projects are rarely completed within the developers anticipated timeline. The Agreement of Purchase and Sale gives the developer two possibilities for unilaterally extending the closing date. First, the developer has the right to unilaterally extend the closing date for 180 days, for any reason, no questions asked. Second, the developer can extend for an additional 180 days as a result of delays beyond their control, such as weather, requirements of the Municipality or labour and material shortages. If you are going to buy a new construction condo unit you should be prepared for the possibility that you could be getting into your unit a year or more later than expected.
2. There are additional closing costs that are standard in the purchase of a new construction condo unit compared to a single family dwelling:
- In most cases, each purchaser will make a contribution equal to 3 months of condominium fees. This amount will go towards starting the Contingency Fund.
- If the building has a superintendent’s unit, each purchaser will be asked to contribute towards the Condominium Corporation’s purchase of that unit.
- Depending on the time of year that the Condominium Corporation is registered, each individual unit may not be separately assessed for property tax purposes for a full calendar year. In that case, you could be asked to give the developer a full year worth of property taxes, on closing, to be paid on your behalf throughout the year.
3. If your unit is completed prior to the registration of the Condominium Corporation you may be allowed to take occupation of the unit for a fee. The developer cannot make you take occupation. For the first six months the developer can charge a maximum occupancy fee of 0.5% of the purchase price. This amount is cut in half for the following six months. Any occupation beyond 12 months shall not be more than 25% of the initial occupancy fee.
4. If the development is a phased project, the developer is under no obligation to complete any of the additional phases. Their only requirement is that the land be used for a substantially similar purpose as the originally planned condo project.
If you have any questions regarding purchasing a new construction condo unit contact Real Estate lawyer Lauren Randall. For your other Real Estate needs, connect with a member of our Real Estate team.