Why You Should Have a Real Estate Lawyer Review Your Pre-Construction Property Agreement in Ontario
Purchasing a pre-construction property in Ontario can be an exciting step toward homeownership or investment. New properties offer modern layouts, energy-efficient designs, and the ability to customize finishes. However, the process of buying pre-construction differs significantly from purchasing a resale property. The agreements involved are often lengthy and detailed, containing terms that can impact your financial and legal obligations.
To navigate these complexities, it’s highly recommended to have a real estate lawyer review your agreement. Here’s why this step is so important:
Understanding the Agreement’s Complexities
Pre-construction agreements are significantly more detailed than standard resale home purchase agreements. They are designed by the builder and often include clauses that protect their interests. Buyers, however, may not be familiar with the technical language or the potential implications of the terms.
For example, pre-construction agreements typically include provisions about timelines, construction delays, deposit structures, and closing costs. Understanding these terms is crucial to ensure there are no surprises down the road.
1. Identifying Additional Costs
One aspect of pre-construction agreements that often surprises buyers is the inclusion of additional costs. Beyond the purchase price, buyers may be responsible for:
- Development levies and municipal fees.
- Utility setup and meter installation costs.
- Legal fees charged by the builder.
- Harmonized Sales Tax (HST) on certain upgrades.
- HST Rebate entitlement
These costs are sometimes vaguely outlined in the agreement, leaving buyers unprepared for the total financial outlay. A thorough review can help buyers understand what to expect.
2. Ensuring Deposit Protection
Deposits for pre-construction properties are a significant investment, often totaling 20% of the purchase price. Buyers need to confirm their deposit is securely held in trust, as required by Ontario law, and that it is protected under applicable warranty programs.
Understanding how deposits are handled, and what happens in the rare event of project cancellation, can provide peace of mind during the process.
3. Delays and Occupancy Terms
Construction delays are common in pre-construction projects. Agreements typically allow builders some flexibility to extend deadlines, which can affect when buyers can move in or take full ownership.
For condominium buyers, interim occupancy fees may apply before the property is officially registered. These fees can add to the overall cost of the property while buyers wait for the final closing. Knowing the terms surrounding delays and occupancy is essential for planning purposes.
4. Tarion Warranty Coverage
Most pre-construction homes in Ontario are covered under the Tarion Warranty Program, which provides protections for buyers against certain defects or construction delays. However, understanding what is covered—and for how long—can be challenging.
Pre-construction agreements often outline warranty details, but it’s important to verify that the terms align with the protections offered under Ontario’s Tarion regulations.
5. Avoiding Common Missteps
Without a full understanding of the agreement, buyers risk overlooking key details. This can lead to unexpected costs, difficulties securing financing, or other challenges. Taking the time to have the agreement reviewed by a professional reduces the likelihood of such issues.
How a Lawyer Can Assist
While this article is not intended to provide legal advice, a real estate lawyer can offer insights that help buyers feel more confident in their decisions. By reviewing the agreement, clarifying its terms, and addressing any concerns, a lawyer can provide valuable assistance during the buying process.
Conclusion
Buying a pre-construction property is an exciting opportunity, but it comes with unique considerations. Reviewing the agreement carefully ensures buyers fully understand their commitments and potential risks. This preparation can make the journey to homeownership smoother and more predictable.
If you are considering a pre-construction purchase, take the time to review your agreement thoroughly, and seek professional assistance where needed. It’s an important step toward making an informed and confident decision.
Should you wish to discuss this Blog feel free to reach out to Eran Gevantschniter a real estate lawyer and can be reached at 416.777.6788 or at [email protected].