Legal Considerations When Buying a Pre-Construction Condo in Ontario

27 Feb Legal Considerations When Buying a Pre-Construction Condo in Ontario

Buying a pre-construction condo in Ontario is an exciting opportunity. Buyers can look forward to a brand-new home with the potential for value appreciation. However, this process involves legal complexities that require careful consideration. 

To protect your investment, it’s essential to understand the cooling-off period, potential delays, and key elements of the purchase agreement. Here are the legal considerations when purchasing a pre-construction condo in Ontario.

1. The Significance of the Cooling-Off Period

Ontario law provides a 10-day cooling-off period for buyers of pre-construction condominiums. This period allows purchasers to review the agreement, consult a real estate lawyer, and reconsider their decision without financial penalty. During this time, it’s crucial to:

• Have a lawyer review the Agreement of Purchase and Sale (APS) to identify unfavourable terms.
• Assess potential hidden costs, such as development charges and occupancy fees.
• Ensure that HST rebates are correctly accounted for in the contract.

If a buyer chooses to cancel within these 10 days, they are entitled to a full refund of any deposit paid.

2. Handling Potential Delays

Pre-construction condos often experience delays, sometimes extending well beyond initial estimates. Delays can be caused by:

• Permit or zoning issues
• Construction setbacks
• Material or labour shortages

The Tarion Statement of Critical Dates outlines estimated occupancy dates and the builder’s right to extend timelines. Buyers may be eligible for compensation if delays exceed 50 days beyond the firm occupancy date (up to $7,500 under Tarion rules). It is essential to understand these terms and clarify what compensation, if any, you are entitled to.

3. What to Look for in the Purchase Agreement

The APS is a legally binding document that dictates your rights and obligations. Here are key aspects to review carefully:

• Adjustments on Closing: Builders often include additional costs, such as utility connections, development levies, and Tarion enrollment fees. These can add tens of thousands of dollars to your final price.
• Assignment Rights: If you plan to sell your unit before closing, check if the agreement allows assignments and whether there are additional fees or restrictions.
• Occupancy Fees: If buyers move in before the final closing, they may be required to pay a monthly occupancy fee (similar to rent). This fee covers property taxes, maintenance fees, and interest on the unpaid balance. The payment does not go toward the purchase price.
• HST and Rebates: Ensure the contract specifies whether HST is included in the purchase price. You could be responsible for thousands of dollars in additional closing costs if not.

Stewart Esten Real Estate Law

Buying a pre-construction condo in Ontario can be a lucrative investment, but it comes with legal risks that buyers should not overlook. Understanding your rights during the cooling-off period, preparing for possible delays, and thoroughly reviewing the purchase agreement can help avoid costly surprises. Consulting a real estate lawyer before signing is the best way to protect your investment and ensure a smooth transaction.

Are you thinking about investing in a pre-construction condo? Let the lawyers at Stewart Esten guide you through your real estate journey. With our seasoned team by your side, you can confidently navigate the intricate landscape of real estate, safeguarding yourself from hidden pitfalls and legal complications. Don’t leave your investment to chance—contact us today!