Legal Issues & FAQs

Purchasing Pre-Sale Condo’s? Give this page a read!

This page outlines potential problems when purchasing a newly built home. Before signing a contract, we recommend that you review the contents of this page AND watch our video at Buying a Presale Home – Spagnuolo LLP. Then talk with your realtor about how you can avoid these potential issues.

 

Developer

  • Who are they and how long have they been developing in the Lower Mainland?
  • Do they have the experience and depth to withstand a market slowdown so that your project is not affected?
  • How is their customer service? There will be deficiencies on closing, will they come back and fix them? 
  • Any online reviews/social feeds to follow? Google reviews?
  • Who are the directors and what is their experience?

 

Completion Dates

  • Completion dates are flexible and uncertain – extensions are common for developers.
  • Very short notice of completion date for the purchaser – usually less than two weeks.
  • The notice can be based on the developers’ estimate of readiness for occupancy. This can create further delays on closing. 
  • With extended completion dates, market value may change; no problem if increase but unit value may decrease, you are bound by the contract.
  • The purchasers must complete once the title is issued and the city confirms readiness for occupancy – this can be a verbal permission to occupy from the city, which can create a problem for funding.
  • Amenities may not be completed upon possession date.
  • Any interest rate guaranteed to the purchaser may not be extended by the lender – the purchaser may end up with a higher interest rate if the completion date gets extended.
  • The purchaser must pay an additional 5% more for GST to CRA.

 

Deposits

  • If the developer cannot complete it, the purchaser will receive their deposit as the sole remedy – this is likely to be without interest.
  • If the purchaser cannot complete, the purchaser will forfeit their deposit without prejudice to the developer’s other remedies. 
  • The interest paid on the deposit may accrue to the benefit of the developer, not the purchaser.

 

Pre-Completion Walk-Through

  • Walk-through time is set by the developer, usually within business hours (Monday-Friday, 9am-5pm).
  • There is no requirement for the developer to remedy deficiencies by the closing date, the purchaser must still complete the purchase.
  • The developer has a reasonable amount of time to remedy after the closing date, the purchaser must allow access to trades (again, usually during business hours).
  • Deficiency holdbacks are not permitted.
  • Deficiency disputes are settled by the developer’s architect.
  • Deficiencies in the building do not include low construction standards.

 

Parking Stalls & Storage Lockers

  • The location of both parking stalls & storage lockers is at the discretion of the developer.
  • Allocated parking stalls & storage lockers may not be adjacent & sizes may vary.
  • Parking stalls & storage lockers may be leased.

 

Construction 

  • Escalating construction costs may result in the developer refusing to continue the development unless they are paid more money.
  • There is no opportunity to view build quality.
  • The layout, area, and materials used are subject to variation at the discretion of the developer.
  • The area in the disclosure statement, marketing material and schedules to the Contract of Purchase and Sale are estimates only – the layout and area are determined by the final strata plan.
  • Usually, there is only a price adjustment if the difference between the draft and the final strata plan is greater than 5%.
  • The price adjustments, if any, are only for the strata lot and not the common property (e.g., the balcony).

 

Assignments 

  • Consent is always required for an assignment.
  • The developer usually has restrictions/prohibitions on assignments.
  • The developer usually has assignment fees.
  • The developer will require significant disclosure on assignments to comply with REDMA.

 

Paperwork

  • The contract of purchase sale is written by the developer’s lawyer on behalf of the developer.
  • The disclosure statement is long and often confusing.
  • Both documents above should be reviewed in detail, and if a buyer is confused they should get legal advice.
  • To keep costs down, review the paperwork in advance and flag the confusing sections. This will reduce the time spent by the lawyer, thereby reducing costs.

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