There are several special things to pay attention to when buying a newly constructed condominium (a “new build”).
Here are a list of the top 3.
New Condo Tip #1: watch your dates very carefully
It can be incredibly difficult to plan the timing of the completion in a new build.
When you sign your Contract of Purchase and Sale (your “Contract”), you will be given an estimated Completion Date.
A Completion Date is one of the most important dates in your Contract. It is the date the property is registered in your name; once the property is registered in your name, the purchase funds are sent to the Seller’s BC Notary or lawyer for distribution.
This Completion Date will be some version of “when we have substantial completion, plus 10 business days”. “Substantial completion” could mean a specific date; it could mean a certain percentage of completion (such as 90%); or it could mean getting an occupancy permit.
There will also be a clause in your contract which says that estimated Completion Date might move depending on things like a change in the construction schedule, interferences due to weather, or acts of God.
The Contract will likely also have an “outside date” – if the terms of the Contract aren’t carried out by this “outside date”, then the Seller may have the option of determining the Contract to be at an end.
The challenge is planning when you need to have your money arranged, and when you will move in, especially when your Completion Date is such a moving target.
The developer of your new build will likely give you some version of updates, and they will also give you notice when your actual Completion Date has been decided upon.
But that notice period might be short, so you need to be ready to go. When you get close to the estimated Completion Date, check in with your developer to see how things are going, and whether they have any news about a firmer Completion Date.
Ensure that we have a copy of your Contract at the earliest possible opportunity, and that your lender is ready to go, with a long commitment date, so you won’t lose your mortgage funding just because the estimated date went long.
New Condo Tip #2: Develop a comprehensive, conservative budget
We will have you sign a fair amount of legal paperwork for your new purchase about 3-5 days before the actual Completion Date.
Part of that paperwork will involve a financial statement called a Statement of Adjustments. The Statement of Adjustments will contain things like:
- your purchase price
- GST and rebates
- Property Transfer Tax and its rebates
- costs for due diligence searches
- lender fees which haven’t been incorporated into your mortgage
- adjustments for shared expenses such as property taxes, utilities, strata fees
- the amount of your mortgage
- our invoice for legal fees and disbursements
- any other closing costs
Many of these amounts will remain estimated amounts until quite late in the process, or even after your actual Completion Date.
For example, in many new builds, the municipal property taxes might not actually be assessed for the property at the time of completion. It may be that we have to estimate the amount of the property taxes for the current year because we simply don’t know how much they will be.
In addition to these costs, you will also want to include in your budget things like:
- moving costs
- the cost for upgrades
- the cost for deficiencies
- the cost for “surprise items” – things you didn’t expect to have to pay for that crop up at the last possible second.
Make sure to be conservative in these numbers – you don’t want to be cut short at the last moment.
New Condo Tip #3: Make a deficiencies list
One of the terms of your contract will be that you will do a “walk-through” when you get close to the estimated Completion Date.
When you do this walk-through, you will want to make a very clear, detailed “deficiencies” list – a list of all of the items which you have contracted for, but which may not yet be finished.
- is all the tiling finished?
- is the flooring finished and does it match what you contracted for?
- is the unit size what you expected it would be (within the allowable “wiggle room”)?
- what are the remaining items which need to be finished before a final occupancy permit can be issued?
Make a list of these items, and discuss a plan for fixing them with the developer. Who will do these repairs? When will they be done by?
Is there a clause in your Contract that allows a holdback to be set aside until these repairs have been properly done?
You will need to put a plan together for following up on these items.
Organize, communicate, revise
The more organized you are with a new build, the smoother things will go as you get closer to your Completion Date.
Talk to your developer on a regular basis, so you know what’s going on, and who is doing what.
When things change, revise your plan. Ensure that you have flexibility in your options, so when the unforeseen happens, you can respond as best you can.
Call us if you have any questions about your Contract.November 5, 2018 10:51 pm