If you have been on the quest for that ideal condominium to purchase as an investment or perhaps has your first home, it may sometimes feel like a daunting task.
Most purchasers will have some idea as to their preferential location, size of their unit and a list of “must have” amenities but often the question is, should I buy a brand new condominium which has not been built or a resale unit which has been previously owned.
Each has its own pros and cons and depending upon your ability to be flexible with your closing dates either type may suit your needs.
Here are a few points to consider before setting out on your purchase:
Brand New Condominiums:
What is a brand new condominium?
In most instances, a project will be launched before the shovel is in the ground. You will enter a sales office that may or may not be on the site that the project will be constructed and you will view a model of the site, model suites and different floor plans for the various proposed layouts of suites in the building. If you decide to purchase a unit, you will be buying directly from the developer of the project.
Floor Plans: You are buying your unit from floor plans and sometimes it is difficult to visualize the final product. The outcome may be better or worse than expected. Remember that you are not buying the model suite and your suite when finished, will look different that the developer designed suite. Always read the fine print in your Agreement of Purchase and Sale and never rely on marketing drawings. Floor plans may be subject to change that includes layout, size, finishes and features.
Delays: New construction means that a developer will rely on contractors and approvals from governmental bodies to complete a project. Although closing dates will be set, often times the dates will be extended. You will need to be flexible and have options available to you in the event that your occupancy date is delayed.
Incomplete Items: Although you expect a brand new condominium to be completely finished when you or your tenants move in, that's not what the typical purchase of a brand new condominium is like. You will be conducting an inspection of your unit prior to your occupancy and that is the time when you will note all the deficiencies (and there will be some), which will be completed after you move in. As far as amenities go, it may take some time before the amenities are up and running, so be prepared.
Two-stage closing: When the unit is ready to be occupied, then you or your tenant will be required to move in to the unit. This usually occurs before the condominium is registered and before the developer is able to legally transfer title to you. The first closing will be an occupancy closing in which you or your tenant will occupy the unit and pay an occupancy fee to the developer (this relates to condominium closings in Ontario). The second closing is the final closing and is that stage when you become the legal owner of the unit.
Getting out of the deal: Check to see what the review period is for new condominium purchasers in your province. In Ontario, all new condominium purchases are subject to a 10-day rescission period. That means that you can sign your Agreement of Purchase and Sale and review the Agreement and documents with your lawyer later and still get out of the deal if you change your mind and notify the developer within the ten-day period.
Warranties: In Ontario, new residential condominiums (with the exception of conversions) are covered by Tarion (the Ontario New Home Warranty program). This provides purchasers with warranties for defects in the unit and common areas as well as added protection for deposits paid to the developer. Tarion also provides for standardized notice periods which the developer must adhere to during the different stages of construction, which deals with the notice requirements for delays in occupancy and the payment of compensation where those notice requirements are not followed. Check your provincial warranty program, if any applies.
Tax benefits: There are often tax exemptions that apply to new condominium purchases that do not apply to a resale purchase. Check with your lawyer as to what applies in your case.
Resale Condominium Unit
What is a Resale Condominium Unit?
It is a unit that is in existence that has been previously owned and is not a unit being purchased directly from the developer.
You see what you get: No guessing or visualization from floor plans. You know what you are purchasing.
Status Certificate: In Ontario, all purchasers should be acquiring a Status Certificate to review before finalizing an Agreement of Purchase and Sale and the Agreement should be conditional upon the purchaser's lawyer review of the certificate. The certificate will include all the condominium documentation and will have important information as to the financial status of the condominium corporation. It will determine whether the corporation has obtained a Reserve Fund Study, whether the Reserve Fund is sufficient to fund anticipated repairs over the long term, whether the corporation is intending to raise money through a special assessment for needed repairs or renovations, whether there are any claims that could impact on a purchasers and other information that may relate to the specific unit.
The age of the building: Depending on the age of the building, there will be deterioration over time and repairs and renovations will need to be done. Depending on how the corporation has planned or these repairs and renovations, this could have little impact on the unit you are buying or could have a large impact. That is why it is essential that the Status Certificate be reviewed along with the condominium documentation.
Closing: The date will be set for your closing and you should be moving on the date set out in your Agreement. There is only one closing and you will be able to plan ahead without needing to worry about delays.
In either case, ensure that once you find the unit that you want, that you get your Agreement of Purchase and Sale, condominium documentation and Status Certificate (for re-sales) reviewed by a condominium lawyer before the expiry of the rescission or conditional period. It is important that you take that time to know exactly what you are buying and fully understand the costs and the process to follow.
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