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Ontario|Real Estate LawBuying A Home 401 New home considerations
- New home purchase agreements
There are a number of differences between buying a new home and buying a resale home. First, the offer to purchase a new home is considerably longer and more complicated than a resale Agreement of Purchase and Sale. In addition, the text is often written in very small print and there is not much space to make changes. For this reason, it is important to take the offer to a lawyer before signing it. Your lawyer will explain the agreement to you to ensure that it is acceptable. With your lawyer's advice and assistance, you may also be able to delete or change terms that are heavily weighted in favor of the builder.
If you are unable to consult a lawyer before signing the offer, you may choose to insert a written clause into the contract stating that your acceptance is conditional on your lawyer reviewing the agreement and finding it satisfactory. Some builders will not accept agreements with substantial changes to the standard clauses. In these circumstances, it is important to assess the reputation of the builder and how past purchasers have been dealt with.
- Delays and extensions to the closing date
When buying a new house which is being built for you, you should be prepared for possible delays and complications. Although many new homes are complete and ready to move into by the scheduled closing date, it is not unusual for the closing date to be delayed or extended. This can happen as a result of strikes, shortages of labour or materials, or simply the builder's inability to meet the original delivery date.
New home buyers generally have less certainty about closing dates and move in dates. To provide a set of rules for both buyers and builders, the Ontario New Home Warranty Program has established a delayed closing code. According to these rules, a delay does not automatically void or cancel an agreement between a buyer and a builder. Almost all builder contracts include a clause that allows the automatic extension of a closing date for up to 120 days. After the 120 days has elapsed, buyers then have a ten day window to cancel the entire contract. If the buyer chooses not to cancel the contract, the closing date can be extended again for another 120 days. Once this second 120 days has elapsed, the contract is automatically cancelled unless both the buyer and the builder agree to further extend the closing date. The Warranty Program also sets rules requiring the 'notice of delay' to be delivered by builders to buyers.
- Deposit protection and warranties
All newly constructed homes and condominiums in Ontario must be enrolled in the Ontario New Home Warranty Program. Purchasers usually have to pay the enrollment fee, which ranges from just over $500 to about $1000, depending on the purchase price of the property. In addition to setting certain guidelines for how the builder must deal with purchasers, the most important part of the program is the insurance plan. This protects purchasers from having to live in an unfinished or defective home if the builder is unable or unwilling to complete the work that needs to be done, and from losing their deposits, up to an amount of $20,000 if the builder goes bankrupt.
If a builder fails to honour its warranty for service and repair, the cost or repairs may be covered by the Warranty Program. If there are certain problems with the home, the buyer is able to make a claim for compensation against the Program rather than having to sue the builder.
The warranty covers new homes for five years. During the first year, the builder is generally responsible for repairing defects in material or quality of work. During the remaining four years, the builder is responsible for repairing any major structural defects in construction that significantly affect the use of the home.
If for any reason the builder is unable or unwilling to return to make the necessary repairs, the Warranty Program will pay for someone else to handle the repairs. Buyers of new homes should be aware that the Warranty Program does not cover every kind of defect in a new home. For more information on what the program does and does not cover, contact your local office of the Ontario New Home Warranty Program. You can find the phone number in the Blue pages of your telephone book.
- Additional costs
Buyers should also be advised of a number of additional costs involved in new home purchases. In addition to the enrollment fee in the Warranty Program, GST is payable on new homes. In many cases, this is already included in the purchase price. Since this is a very significant expense, the Agreement of Purchase and Sale should clearly state if the GST is included and how any rebates are to be handled. Other extra charges can include lot levies, sewer impost charges, hydro meter installation, curb charges, gas hook-up charges, water hook-up charges, tree charges, and super mailbox charges. If you are buying a new house, you should be sure that you know what is actually included and what additional costs you will be responsible for on closing.
Buying a new home is usually more complicated than buying a resale house. Your real estate lawyer will be able to answer most of your questions relating to your purchase.
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