1) Surprise Closing Costs
A builder's agreement to purchase a newly constructed
condo (in contrast to the simplicity of a resale condo) contains pages
of fine print which are NOT standard for each builder
since each has it's own pet clauses. The "adjustments" chargeable on closing
(in addition to the upgrades ordered by a purchaser at time of colour
selection and in addition to the closing costs of legal fees, legal disbursements
and land transfer tax) can be substantial. In the last few years, many
builders have been more creative in their fine print for items charged
on closing which adjust the ultimate purchase price upwards- e.g. the
unit's share of the building's sewer connection charges, education development
charges, bulk hydro meter, estimated property taxes for the year after
closing (as well as for the balance of the year of final closing), initial
reserve fund contribution, subway connection charge, (if applicable) etc.,
with each such charge ranging from a few hundred dollars to two thousand
dollars plus. The total of such adjustments (depending on the builder's
fine print) can add up to a nasty surprise on final closing.
2) Room Sizes and Square
Walk into a new condo site and you will be provided
with glossy brochures showing layout (floor plans) of the various models
with room dimensions and square footage of the model which can magically
disappear from the floor plan (with many builders) as soon as an offer
to purchase is being signed. Remember, the builder's promotional advertising
is not meaningful since what counts is the actual terms in the agreement
of purchase and sale signed by purchaser and by builder. If it is not
in writing within the terms of such agreement, the contents of the glossy
brochure mean nothing. Verbal assurances by the builder’s sales representative will not help. It is wise to insist that the floor plan showing room sizes and square footage be a schedule inserted in the builder’s sale agreement being signed by the buyer.
3) Does a Buyer Get Interest on Deposits When Buying From a Condo Builder?
Section 82 of the Condominium Act states that the builder must pay the buyer interest on all deposits paid before the interim occupancy closing and only up to such occupancy closing date. However, the prescribed rate of interest referred to in section 82(1) is defined in section 19(3) of Ontario Regulation 48/01 as 2% per annum below the Bank of Canada overnight bank rate which currently is only 1%; therefore, money on deposit with a builder is not earning any interest now. In fact, money on deposit with a builder going back to December 9, 2008, earned ZERO interest since that is the date that the overnight Bank of Canada rate dropped from 2.25% to 1.50%, and has remained below 2% since such date. NOTE: The Bank of Canada overnight bank rate is typically a lower rate than the Bank of Canada prime rate.