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New Condominium Purchases - Three Cautions

Buying a brand-new condominium has many advantages. Buyers tend pay a lower purchase price and often there is no GST/HST payable. New-built also often means more options and decision-making power on the unit's features and upgrades. But before rushing to sign the purchase agreement, buyers should be aware of several drawbacks. Our post this week looks at some of them.

Buyer Be Informed

What some buyers may not realize is this: buying a new condominium is somewhat different from buying a resale condominium. In both cases, the buyer has to get a status certificate to ensure there are no lawsuits against the condominium and that there is a healthy reserve fund.

However, there exist a few issues unique to brand-new condo purchases which don't apply to resale purchases. Those include:

  • The "occupancy fee"
  • Development costs
  • The possibility of a delayed closing

The Occupancy Fee

Before buyers can take title to their property, there is a period called an interim occupancy. During this period, the builder starts moving buyers into the inhabitable parts while finishing construction on the rest of the building. As buyers don't yet own the unit, they are subject to an occupancy fee. Essentially, they're paying rent to the developer for the period in which they live in their unit without owning it.

Development Costs

Development costs appear in the purchase agreement in the form of levies and educational costs. Many purchase agreements do not stipulate the specific costs, so it's important to understand that buyers can and should ask the developer to have these costs capped. Without a price cap, buyers can end up paying more than they should, but stating a maximum empowers the buyer with better predictability.

Delayed Closings

Under certain conditions, the developer can delay the closing. The occupancy period may also be extended if the purchase agreement allows for it. Buyers should be aware of these plausible delayed dates before arranging their move or making financing arrangements.

Whether pre-owned or new-built, prudent buyers get themselves informed on their rights and have the purchase agreement reviewed by a real estate lawyer before signing.

Buying a new condominium?

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