Buying A Pre-Construction Condo
Tags: Condo, Toronto, Real estate, buying and selling
2 minute read.
With housing prices as high as they are, it’s no surprise that the condo market in the GTA is still going strong. Our skylines seem to be ever-changing with new buildings reaching new heights every single day. The residential condominium construction industry is full of attention-worthy innovations from roof-top green spaces filled with trees to the elimination of parking lots completely. In recent years, there has also been an increase in demand for larger units with two bedrooms or more to accommodate the new urban family profile. More and more families are considering a condo to call home rather than a typical detached house in a suburban area and this is suiting the developers just fine.
Are you interested in purchasing a condo from a builder? Here’s what you need to keep in mind before purchasing pre-construction (or mid-construction);
- Take your Occupancy date with a grain of salt as delays do happen. Anything from labour strikes to the changing of building codes or inspection requirements, developers often hit snares when building a high-rise condo. It is because of this that you need to make sure you are not relying on your initial closing day. You could be delayed a long time, perhaps even years if you’re not lucky!
- Moreover, in most cases, your Occupancy Date is NOT your closing date. The occupancy date is when you gain access to the unit which is also called Interim Occupancy. This time period will continue until the builder has achieved a pre-determined percentage of occupancy and then they will be allowed to register the condominium within the Province of Ontario. Closings and transfers of title typically take place 60 days after this time period.
- Take the time to understand what your “Occupancy Fee” is. For example, you have purchased a unit on the 10th floor of a 45-storey building. You will likely gain occupancy to your unit before construction is complete. In fact, it is almost unheard of for this not to happen. The condominium development is required to achieve a certain percentage of occupancy before legally registering the condo and closing on your unit. While you are waiting for this to happen, you essentially pay rent while in your new home. Wait. What? Ok, let me explain. When you purchase a pre-construction condo, you agree in your purchase agreement to take possession of the property on the occupancy date and to pay the occupancy fee to the developer until the closing of the property occurs (this can sometimes take a year or more!). The Occupancy fee is comprised of a portion of property tax, your estimated maintenance fee and an amount for ‘rent’. Be aware that the portion of rent that you pay in your occupancy fee does not go toward your mortgage or down payment. Interesting isn’t it.
- Pay close attention to your floorplan as they do not always come out exactly. Square footage and layout on a floorplan are great to help you imagine your space however the building code allows for developers to have flex space in size and design. Although the same unit may be available on many floors, there are often minor differences between them. Make sure that the unit you purchase truly is the floorplan that you want and ask to see the plan for that specific unit instead of just the marketing materials!
- Mind your cooling-off period as well know emotions can get the best of us. In Ontario, residential condominiums have a ten-day cooling-off period for the buyer. This is not new. When you purchase a residential condominium you will have ten days from the date of the agreement to review (preferably with your lawyer) the purchase agreement and the Condominium Declaration and By-laws. As compared to a resale residential condominium in which you would receive a status certificate outlining the overall ‘health’ of the condominium and how it is managed. If there is anything in the agreement or the declaration that you aren’t sure about, or really, for any reason at all, you can cancel your purchase of the pre-construction condo and receive your deposit back in full.
- Ensure that you consider the maintenance fees and what they cover. The largest factor of fees has to do with what types of amenities are in the building. Also, ask the builder about anticipated increases within the first two years as these can often be significant. Be mindful of the maintenance fees listed in the marketing materials and in the Condo Declaration as these are often just ‘best guess’ when there isn’t even a shovel in the ground. The number you sign on the dotted line for may change significantly when all is brought to life.
At the end of the day, the condo lifestyle may not be for everyone. In the GTA it seems to be for a lot of people! Make sure, you know exactly WHAT you are buying because there can be many variables that are not guaranteed.
At Knowledge Broker, our goal is to create an open-source of information for all our clients. We want to ensure that, at the end of the day, they get exactly what they want and what they need. If you know someone who could use our help or services please put them in touch with us or send us their details using the contact information below. And before you go, click here to take the Knowledge Broker Quiz and see exactly what we can do for you!
JOSHUA CAMPBELL (@knowledgebrkr)
Real Estate Broker
Coldwell Banker The Real Estate Centre, Brokerage
249 Avenue Road • Newmarket, ON L3Y 1N8