Understanding the rules and regulations regarding deposits for pre-construction home purchases in Ontario is crucial. Whether you are buying a condo or a freehold home, it is essential to know if and how your deposit is protected and how to protect yourself financially.
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There are two types of ownership of condos: Freehold and Leasehold, with Freehold accounting for a significant majority. Freehold condos can be divided into four types: Standard Condos, Common Element Condos, Phased Condos, and Vacant Land Condos. Standard condos have common elements and individual units, with owners responsible for their units and the condo responsible for common element repairs and maintenance. Common Element condos only consist of common elements, and owners acquire a parcel of tied land instead of purchasing a unit. Phased condos are developed in multiple phases, and once all phases are registered, they become standard condos. Vacant Land condos are registered before construction is completed, allowing buyers to customize their lot/unit.
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Due to the pandemic and rising costs, pre-construction projects are facing delays or cancellations. Here’s what buyers can do to protect themselves. First, check your Tarion Critical Days. For pre-construction condos, there should be a Tentative Occupancy Form or a Firm Occupancy Form. The developer can change the tentative occupancy dates as long as they provide advanced notices that meet Tarion’s requirements. The Firm Occupancy date should be the final delivery date for the property. If possession cannot be completed by this date, buyers can request delayed occupancy compensation of up to $7,500 per unit. The Outside Occupancy Date is the final deadline for possession. If the unit cannot be occupied, buyers can terminate the transaction within the next 30 days with fully refunded deposits, interest, and delayed occupancy compensation. Keep in mind that some delays may be unavoidable, and not all delays will be compensated. Second, bring your Agreement of Purchase and Sale (APS) to your lawyer for legal advice. Clauses that may cause delays should be reviewed to protect your interests and avoid confusion. Your lawyer should also ensure that the developer complies with the APS and Tarion rules.
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Consider the pros and cons of pre-construction condos. Are they right for you? Weigh the benefits and drawbacks carefully. Pros: 1. Smaller initial payments from signing to occupancy, ideal for first-time homebuyers and investors. 2. Brand new home. 3. Customization options for décor and interior design. 4. Access to the latest trends and building amenities. 5. Lower maintenance fees. 6. Fixed price. Cons: 1. No actual “product” until construction is complete. 2. Potential floor plan changes. 3. Higher risk of bankruptcies and project cancellations. 4. Limited Tarion deposit protection. 5. Limitations on renting, selling, and assignment. 6. Occupancy fees and taxes may apply. 7. Health and convenience concerns during construction stages.
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The condo market has gravitated towards a buyer’s market, giving buyers more negotiation...
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