The housing construction boom in Canada over the last few years is buoyed by new condo construction. Yes, more and more Canadians are buying ‘homes in the sky’ in the pre-construction phase, paying tidy sums as down-payments before there’s even a shovel in the ground.
It can be very exciting to think about getting into a brand new home that no one else has ever lived in, where everything is shiny and clean and in tip-top shape. But buying sight-unseen has some particular risks, and there are important things to consider to help prevent unwelcome surprises down the road.
1. Developer Reputation
Check on the reputation of the developer. Find out what other building projects they’ve completed, and check in with a council/board member who was there at the beginning and find out what they thought of how the developer behaved during the transition to the condo or strata corporation.
2. Drawings and Specifications
Check the floor measurements to make sure you’re clear about the actual floor area and ceiling height. Ask if there are any plans to add ductwork, electrical or mechanical services that will result in a lower ceiling height. This can have a dramatic impact on both the look and the feel of your unit if you’ve suddenly got seven- foot ceilings in some areas instead of the promised nine.
3. Construction Progress
How likely is it that construction is going to be completed on time, as set out in the purchase agreement? You don’t have to look far to find purchasers of new condo projects who found their occupancy dates delayed by months, and sometimes years. Delays are not always the fault of the developer, either: weather, labour disputes, and materials shortages are all beyond the control of the developer but can significantly impact construction progress. Check your contract for the fine print around the “drop dead” date, which is when a developer is obliged to compensate for delays, and be sure you have a contingency plan in the event you do not get to move in when you planned.
4. Neighbourhood Development Plans
Find out about any potential construction plans around your new building. Ask the municipality, ask your developer, ask the neighbourhood business association. Is your building part of a larger complex? Is there anything planned in the future that might inhibit your view, your quality of life, both during and after construction?
5. What’s In, What’s Out
Pools and parking are great perks, but is there adequate provision for access and repairs in the maintenance fees? Exactly what finishes are included in your unit’s price? What utilities are included in your maintenance fees, and for those that aren’t included, ask for proof they are separately metered so that you don’t end up inadvertently picking up your neighbour’s bills.
6. Occupancy Dates
Make sure you understand the variables around your occupancy date. Does the developer have the right to extend the occupancy date if construction is delayed? How much notice do they need to provide? Find out what’s in your provincial or territorial homeowner protection legislation with respect to occupancy dates so you know what recourse you may have if those promised occupancy dates are missed.
7. Pre-approved Financing & Contract Transfers
When you seek financing for a pre-construction condo be aware that by the time your deal is about to close, your own personal financial situation may have changed, market prices may have risen, or fallen, or the financial rules may have changed. For example, when former federal finance minister Jim Flaherty changed lending rules in 2012, many people found themselves suddenly unable to meet the new and more stringent borrowing criteria. While it is impossible to predict what changes the future may hold, you can double-check your contract for any transfer restrictions. If financial circumstances do change for the worse, being able to transfer the contract (assignment) is a better choice than losing your down-payment.
8. Legal Advice
It goes without saying, but don’t ever sign anything or give anyone money until you’ve consulted with a reputable real estate lawyer, preferably one with experience in pre-construction condo sales.