Area of Law: Real Estate Law
Answer # 417
Buying a new or resale condominiumRegion: Ontario Answer # 417
Buying a newly built condominium unit can involve a number of complicated issues. Depending on whether the person is purchasing a pre-construction condo or one that has just been completed, a buyer may have to deal with an interim closing date, a final closing date, and occupancy fees. These all arise because the condominium cannot be registered until the building is fully constructed and the builder cannot give full legal ownership and title to the new buyers until registration. Although buyers can move into their units without legal title, they cannot own their units or obtain a mortgage loan until registration.
The Ontario Condominium Act contains rules about purchasing and moving into a condominium before it is registered. On the interim closing date, the buyers are permitted to move into their completed units even though the condominium is not yet registered and the builder cannot yet give them legal ownership. Instead of paying the balance of the purchase price, purchasers are required to pay an occupancy fee, similar to rent, until the final closing date when they get legal ownership. This fee covers expenses such as taxes, maintenance, and interest on the unpaid balance due on closing which usually is not paid until title closing.
When the condominium is registered, the purchaser can obtain mortgage funds and the builder will give the buyer the legal ownership of the unit. After this final closing date, the purchaser will not need to pay any occupancy fee, but will pay his or her mortgage, realty taxes, and common expenses instead.
Difference between buying a new condo or a resale condo
There are a number of differences between buying a newly built condo from a builder, and buying a resale condo.
1. Cancellation period. The Condominium Act gives buyers of new condominiums a 10-day period from when the agreement is accepted during which they can cancel the deal. This is intended to allow purchasers time to review the condo documents and to seek legal advice. This 10-day period does not apply to resale condominiums.
2. Disclosure Statement & Status Certificate. When you buy from a builder, you will receive a package of materials called a disclosure statement. With a resale condo, you must request and pay a fee to receive a similar package called a status certificate, provided by the condo corporation. Both packages include copies of the declaration, which sets out the definition of units and common elements, and by-laws governing how the condo will be run. In addition, a disclosure statement must also include:
- a general description of the property,
- any restrictions on pets,
- the condo corporation’s current budget, showing costs for items such as salaries, maintenance and utilities,
- the number of units the builder intends to lease, and
- the estimated completion date for the construction of amenities.
3. Condo Guide. The newly formed Condominium Authority of Ontario must provide all new condo developers with an easy-to-read condo guide containing the essential information about how condo corporations are governed and the roles and responsibilities of condo owners. Developers are required to give a copy of the guide to all buyers at the time of sale.
4. Ontario New Home Warranties Plan. This protection is available to new condo purchasers, and purchasers of specified converted properties.
Ontario New Home Warranties Plan
Like buyers of other new homes in Ontario, purchasers’ of newly built condos are covered under specific warranties. The Ontario government, through the Ministry of Government and Consumer Services, has empowered the agency Tarion to administer and enforce the Ontario New Home Warranties Plan Act.
Pursuant to the new law, the protections offered by the Ontario New Home Warranties Plan is now available to purchasers of converted properties specified in the Act.
Some warranties would not apply to the pre-existing elements of a condo conversion, namely that the pre-existing elements have been constructed in a workmanlike manner and are free from defects in materials. All other warranties, such as the one-year warranties, and other two-year and seven-year warranties would apply to both pre-existing elements and new elements of a conversion.
The 3 main warranties provided by the Ontario New Home Warranties Plan
1. Deposit protection
Under Tarion’s New Home Warranty Plan, purchasers are protected against the loss of their deposit, up-to a maximum of $20,000, if their condo is not completed. If the builder of your new condo fails to complete construction and files for bankruptcy, you can make a claim against the Plan to recover your deposit.
2. Delayed occupancy
As well, if the occupancy date (the anticipated date condo unit will be completed and ready for you to move into) is delayed, compensation may also be available under the Act.
3. Coverage for deficient work, materials and structural defect
Purchasers are also entitled to one and two-year warranty protection against defects and working materials and a seven-year warranty protection against major structural defects.
What to consider when buying a resale condo
The Canada Mortgage and Housing Corporation (CMHC) provides a comprehensive list of things to consider when buying a resale condominium. This includes:
- Hire a home inspector to evaluate the condition of the unit as well as the building as a whole.
- If possible, consult the condominium’s technical audit and/or reserve fund study to determine the condition of the building and common property.
- Examine the corporation’s annual operating budget, end-of-year financial statements and the estoppel or status certificate.
- Know exactly what is and isn’t included in the purchase price so you can compare overall costs with other condominiums.
- Ask what the monthly condo fees include and when they are likely to increase.
- Verify that there’s enough money in the reserve fund to cover the cost of major repairs and renewal projects.
- Verify whether any special assessments are anticipated, what they are for, how much they might cost and when they will need to be paid.
- Ask if any new home warranty coverage remain on the unit.
- Verify if there are any legal actions against the condominium corporation.
What to consider when buying a new condo
CMHA also recommends a number of things to consider when buying a new condo as well, including:
- Review the condo unit’s drawings and specifications showing floor measurements so you know the exact condo size and space you are buying.
- Ask if you can make any changes to the unit, such as moving walls and types of doors, and what it might cost.
- Confirm the future locations of heating, A/C units, and water heaters.
- Find out what exactly is included in the purchase price (e.g. any amenities such as a gym, parking, locker).
- Ask what will the monthly condo fees be and what will they include (e.g. utilities such as gas, heat and water).
- Find out if the unit comes with a new home warranty.
- Review the ‘disclosure statement’ provided by the developer (detailing condo’s features, governing documents, and first year budget).
To review your provincial legislation and for more information about condominiums, visit our Links section.
Additional information can also be obtained from the Ontario Ministry of Government and Consumer Services at ontario.ca, and from the Condominium Authority of Ontario (CAO) Residential Condominium Buyers’ Guide. If you are purchasing a condominium, your lawyer can help you to understand all the documents and obligations that apply to the condominium corporation and to your unit.
If you are buying a home and want to know how much of a mortgage you qualify for, use the Scotiabank mortgage calculator .
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