FAQs

WHAT’S IMPORTANT TO CONSIDER WITH A NEW BUILD CONDO?

You want to ensure that the developer has a good reputation for completing projects and delivering to the purchasers what was promised.

Always consider location when buying any real estate but in particular when purchasing condos in urban centres. Particularly if you’re an investor, we recommend purchasing in condo projects that are located near transit as there will be greater demand for tenants and values tend to appreciate faster in these areas.

Ensure you have the following incentives with your purchase:

  • Right to Assign

  • Right to Lease During Occupancy

  • Capped Development Charges

WHAT’S THE SIGNING PROCESS?

Once you decide upon a unit, you can expect your agreement of purchase and sale (APS) to be emailed to you for e-signatures within 48 hours.  The 30-40 page document is required to be signed within 24 hours of receiving it which understandably does not give you a ton of time to review it thoroughly. Understand that this is all part of the process and by you signing, you are in no way firm and binding on the deal. In the Province of Ontario, you are automatically given a 10 day due diligence period, allowing you and/or your lawyer ample time to review.

SHOULD I HAVE A LAWYER REVIEW MY AGREEMENT?

It is recommended that you have a lawyer who specializes in new build condos review your agreement and protect your interests in the purchase. We would be happy to recommend a few lawyers and make the introduction (at no cost to you until closing).

WHAT IS THE LAWYER LOOKING FOR IN MY AGREEMENT?

Keep in mind that the majority of new build condo agreements are written very similarly to one another and are written in favour of the developer. Knowing this, the lawyer is mostly looking through the documents for any discrepancies that you need to be aware of, to ensure that your incentives are included and to provide you with a good understanding of what your closing costs will be.

DO THEY CASH MY INITIAL CHEQUE TODAY? 

Some developers will ask for an initial cheque to be certified or bank draft; in the event you do not move forward with the purchase, the cheque can be returned to you. Other developers ask for a personal cheque which is not cashed until you have passed the 10 day due diligence period.

WHEN ARE MY POST DATED CHEQUES DUE?

The developer asks for all post dated cheques up front so that they are not chasing purchasers around in the years to come.

WHAT HAPPENS IF THE DEVELOPER CANCELS?

When cashed, your deposits are held in the developer’s lawyer’s trust account. Should the developer cancel the project, any money held within that account, will be returned to you in full. So long as the developer cancels within the time period allotted within the Critical Dates page of the Tarion Home Warranty outlined in your APS, there is no recourse for the lost opportunity cost of your deposits.

WHAT’S A MORTGAGE PRE-APPROVAL AND WHY DO I NEED ONE NOW?

In order for the developer to get construction financing, they need to show their lender that all of the purchasers are financially sound and they do this by showing them a Mortgage Pre-Approval (MPA) letter that states that you as a purchaser should be able to qualify for a mortgage in 3 or 4 years (or whenever the building gets build) for a specified amount at a specified rate.  This letter is usually due within 30 days of signing for your APS.

This MPA is not a guarantee that you as a purchaser will qualify for a mortgage in the future so it’s important that you ensure you are making the right decisions over the course of the build so that you will be able to qualify for a mortgage.

WHEN DO I GET A MORTGAGE?

A mortgage is required when you actually close on your property.  A mortgage is NOT required at occupancy.

WHAT IS AN OCCUPANCY PERIOD?

Occupancy begins on the day the building is ready for purchasers to move in but because the Condominium Corporation has not yet been registered with the city, purchasers are not yet allowed to take title. During this period of time you are required to pay an Occupancy Fee which is made up of your maintenance fee, property taxes and portion of the interest that the developer is required to pay for your unit.

Your monthly expenses at this time should be less than what you will pay after closing because you do not have your mortgage payment. This period of time typically lasts anywhere from 6 to 9 months.

WHAT DOES RIGHT TO LEASE DURING OCCUPANCY MEAN?

Not all developers give purchasers the right to lease during occupancy which is fine if you’re an end user because you are moving into the unit. However, if  you are an investor, you will be out of pocket the expenses noted above with no ability to receive rental income.

It’s important to make sure you have this ability in writing from the developer so as to not be blindsided at Occupancy.

THE CONTRACT SAYS THE DEVELOPER CAN DENY A TENANT DURING THE OCCUPANCY PERIOD, WHY?

Technically speaking, during the occupancy period, you do not own the unit and because of this, the onus is still on the developer and because of this, they want to have the right to deny a potential tenant. 

We’ve been selling new build condos for over 15 years now and have never experienced a developer deny a tenant.

WHAT ARE THE CLOSING COSTS?

You should save for the following costs on closing:

  • Lawyer fees: $1,500 - 2,000 (depending on your location)

  • Land Transfer Tax: Calculate this number by CLICKING HERE

  • Development Charges: These should be capped so be sure to check your APS

  • Additional fees and charges: These change from project to project but include items like your Tarion Home Warranty, Utility Metres, Educational Levies, Parkland Improvements, and Public Art. Understand that you are investing into a neighbourhood which will need improvements based on the new residents. Roughly speaking these fees can range anywhere from $5,000 - 20,000.

  • HST: if you are required to pay HST on your purchase, this will be done at closing and will likely be in the range of $18,000 - 27,000.

DO I PAY HST? 

If you are an end-user of the unit (ie; you will be living in the unit yourself), you are not required to pay additional HST, it is included in the purchase price.

If you are an investor, you will be paying HST to the builder on closing through your Statement of Adjustments.

DO I QUALIFY FOR AN HST REBATE?

If you do not rent out your unit and are therefore not providing the much needed housing for renters, you will not qualify for a rebate.

If you do rent out your unit and can show the CRA a 1-year Lease Agreement, then you will qualify for a rebate. The amount you receive back will be based on your purchase price and the amount of HST paid, up to a maximum of $24,000.

HOW DO I APPLY FOR AN HST REBATE?

We have a few specialists who we like to work with who will be able to help you with the application process. You can expect to receive your rebate back within 2-3 months.

WHAT ARE CAPPED DEVELOPMENT CHARGES?

When the building is registered with the city, the developer is required to pay the city a number of fees and taxes per unit. At this time, the developer then charges you, the unit owner, your portion of the fees. If these are not capped in your agreement, it is difficult to predict just how much the fees will be and in some cases we’ve seen them as high as $40,000.

The cap ensures that if the amount comes in less, you as the unit owner will be required to pay just what was charged to the builder. If, however, the fee comes in above the cap, you will only be required to pay the capped amount and the developer will be on the hook to pay any outstanding balance.

WHAT IS TARION HOME WARRANTY?

In the Province of Ontario, you are required to purchase Tarion Home Warranty with your new build condo. This warranty protects you in the event that the builder fails to fulfill their obligations.

WHAT US COVERED?

1 Year Warranty

  • Requires a home is constructed in a workman-like manner and free from defects in material;

  • Protects against unauthorized substitutions

  • Requires the home to be fit for habitation;

  • Protects against Ontario Building Code violations; and

  • Applies for one year, beginning on the home’s date of possession even if the home is sold.

2 year Warranty

  • Protects against water penetration through the basement or foundation walls;

  • Protects against defects in materials that affect windows, doors and caulking and defects in work that results in water penetration into the building envelope;

  • Covers defects in work or materials in the electrical, plumbing and heating delivery and distribution systems;

  • Covers defects in work or materials that result in the detachment, displacement or deterioration of exterior cladding (such as brickwork, aluminum or vinyl siding);

  • Protects against violations of the Ontario Building Code that affect health and safety; and

  • Applies for two years, beginning on the home’s date of possession.

7 Year Warranty

Covers major structural defects such as load bearing elements or problems affecting the use of a significant portion of the building

WHAT IS AN ASSIGNMENT?

An assignment is when an original purchaser sells their interest in a property before they take possession, ie. the sell the paperwork to a new buyer. The new buyer (assignee) then takes the role of original purchaser (assignor) and is responsible for closing on the unit and paying any fees.

WHEN CAN I ASSIGN?

There are restrictions written into your APS that stipulates what criteria must be met before a purchaser is allowed to assign. Usually this includes that the project is 90% sold and construction has been completed to a specified amount (ie. once the roof has been built).

HOW DO I FIND AN ASSIGNEE?

Due to the complexity of assignments, we recommend that you do work with a real estate agent who understands how to put these deals together. Our team does roughly 30-40 assignments every single year and can help you with this process.

WHAT ARE THE COSTS ASSOCIATED WITH AN ASSIGNMENT?

The developer’s lawyer will charge you a legal fee to process an assignment, usually $500; additionally, some developers will charge an administrative fee for an assignment so be sure to check your APS. 

Your own lawyer will charge a fee to process the assignment which is anywhere between $1,500 and $2,000.

If you use an agent, you can expect to pay 5% on the sale price, like that of a regular resale deal.

There may be tax implications on your assignment so be sure to check with your accountant.