The recent news of Stateview’s bankruptcy and the risk to buyers’ deposits unveil key facts that buyers should be aware of:
• Deposits for the purchase of condo units (including Common Element Condos) should all go to the developer’s Trust Account according to Ontario’s Condo Acts.
• Currently, there is no law to regulate deposits for freehold homes that are not condominiums. Therefore, developers are NOT required to set up a Trust account for buyers’ deposits in such cases.
• Ontario’s Tarion New Home Warranty program serves as an extra layer of protection for buyers’ deposits, both for condos and freehold homes. Each condo unit is covered up to $20,000, and freehold homes up to $100,000 for the loss of deposits.
Make sure to:
1. Write the deposit check to the developer’s Trust account if you are buying a condo property. These funds can only be released to the developer once the project has reached a certain stage of construction and cannot be used prematurely or deliberately by the developer.
2. Before signing the Agreement of Purchase and Sale (APS), double-check the licensing status of the builder with the Home Construction Regulatory Authority (HCRA) and ensure that the building and project are registered and enrolled in the Tarion New Home Warranty program.