Condominiums are an increasingly popular choice for new home buyers, but they are not without certain risks. Understanding what’s part of the condominium experience and what might happen when you buy a pre-construction condominium unit will help you make a more informed decision. Here are some things that you should consider before you buy:
Your purchase agreement contains important information about your rights, your builder’s rights, your unit, and the project. To ensure that you are protected and understand exactly what you’re signing up for, it is strongly recommended that you have it carefully reviewed by a lawyer. Also keep in mind that you have a 10-day cooling off period after you sign a purchase agreement for a new condo unit. So, if on further review you decide that you no longer wish to go through with your purchase, you’re able to terminate your agreement within that period and get your deposit back.
Since a condominium project requires a lot more time to complete than a single-family home, the potential for construction delays is much higher. When it comes to setting your move-in, or “occupancy date,” chances are your builder will set a Tentative Occupancy Date. This allows them to extend the date multiple times provided they give you sufficient advance written notice for each delay. You can review the addendum attached to your purchase agreement to understand how occupancy dates may be extended, when you can terminate your agreement because of delay, and when you might be eligible under the warranty for compensation due to delay.
There’s always a risk that a condominium project could get cancelled. Some of the most common reasons for project cancellations include insufficient sales, lack of funding, and failure to obtain development approvals. Review the addendum attached to your purchase agreement to understand the early termination conditions that, if not satisfied, may result in the project being cancelled. If a project gets cancelled, you are eligible to receive your deposit back, including any additional payments you made for upgrades. Deposits must be placed in trust and if payments are not refunded, you’re eligible for protection from Tarion of up to $20,000. For more information about condominium cancellations, click here.
Although you may be able to take occupancy of your unit, you do not officially own it until the entire project is registered with the municipality. The time in between is known as the Interim Occupancy Period. During interim occupancy (which can last anywhere from a few months to more than a year) you must pay a monthly fee to your builder that covers three things: interest on the unpaid balance of your unit, estimated municipal taxes for your unit, and maintenance expenses.
Variations in Unit Floor Area
When you first step into your new unit, you might be surprised to discover that it is somewhat smaller than you expected. Unit measurements included in the builder’s sales materials often don’t account for space taken up by mechanical shafts, structural components, and other things. In general, a variance of up to 2% is considered acceptable. If you find that the variance is more than 2%, you need to work with your builder or consult a lawyer about what can be done. The new home warranty does not cover variations in square footage.
Variations in Unit Layout and Finishings
Builders allow themselves the flexibility to make changes to both the project as a whole as well as your individual unit. However, the Condominium Act prevents them from making what are called “material changes.” It is important that you review your purchase agreement with a lawyer so that you understand what might constitute a material change, and what you can do in that situation. Minor changes to unit layout and finishings are within your builder’s rights, and something you should be prepared for.
If you are among the first to be granted occupancy, you will be living in your unit while the rest of the building is being completed. As a result, you should expect to deal with construction related issues such as noise, debris, and disruptions. Also bear in mind that some of the amenities you are looking forward to using, such as a pool or fitness room, may not be ready for some time.