Whether you are buying a commercial or industrial unit directly from a builder or a resale it can be a confusing process.
It is highly recommended that when signing a purchase and sale agreement to always make your agreements conditional to your solicitor review of all the terms and conditions. Especially when buying from a builder; as the builder usually require you to sign on their own builder’s agreement. Builder agreements tend to be very lengthy and usually strongly drafted in their own favor.
In the event that you have not inserted a condition for your real estate lawyers review of the agreement. You have the option to take advantage of the 10 day cooling off period. This is pursuant to the Condominium Act and your right when purchasing a brand new Condo unit; this advantage is not for resale condos.
What this means is that you may cancel the agreement and get back your full deposit within 10 days from the date you received copies of accepted Builders agreement and Disclosure Statements. The request to cancel must be in writing and must be provided to the Builders lawyer within the 10 day period. Since there is no cooling off period when purchasing a resale unit, you should have your agreement conditional on your lawyer’s approval of all the terms and conditions of the Resale Agreement and the Status Certificate.
Keep On Top Of The Dates And Deadlines
There are a few dates included in the Builders agreement which are critical and you must pay close attention to such as the occupancy date and transfer date. The first date is the occupancy date. This is the anticipated date that the buyer can occupy the unit. Shortly after the occupancy date is the transfer date or rather the closing date. This is when the condominium plan is registered and the title to the unit will be transferred to the buyer.
It is important to know that that from the occupancy date to the transfer date, the buyer is responsible to pay to the builder occupancy fees. These fees are similar to paying rent. It is important to review the agreement and know the builders right to extending the occupancy date. It could be months or even years.
A long extended occupancy can cause great difficulty for a buyer looking to occupy for their own self use. If the occupancy is delayed and the buyer needs the space, they will have to arrange for alternative space and incur rental expenses and if they can not arrange for their space, it could possibly have them close their business.
Not to mention that it is equally important to pay attention to the time difference between occupancy and transfer date. The occupancy fees paid to the builder until the transfer date is not credited to the buyers. Therefore it is an additional expense for the buyers with not much advantage. Ensure you know the dates and how much rights the builder has to extend the dates. The buyer should be provided with a termination right after a certain time and periods of delay.
The Disclosure Statement Is Incredibly Important
It is a mandatory requirement for the builder to provide the buyers with the Disclosure Statement along with the Builder’s Agreement. The Disclosure statement includes important information about the condominium project, including the proposed declaration, rules and regulations, the by-laws, the budget and monthly common expenses to be paid by each Unit, management agreement and condominium plan that outline the location of the units.
Reviewing these documents and the information provided in the Disclosure statement may affect your decision to purchase the unit. Therefore, you should review them before you’re the purchase becomes binding.
When reviewing the Disclosure statement, below is a list of issues to pay attention to:
- Restrictions in the activity and use of the Unit that could prevent you from operating your business
- The builder’s right to alter the design, style, size, layout and/or configuration of the Unit and common elements comprised within the Condominium Corporation (the “Condominium”)
- Restrictions on the location or type of signage permitted
- Whether any signage space on the pylon sign will be leased or owned by unit owners and the associated costs of owning or leasing space on the pylon sign and on the face of the Unit
- Whether utilities will be separately metered in each Unit
- Whether unit owners are responsible for paying for their own waste and recycle removal
- The builder is providing a shell Unit on occupancy (unlike with residential units) and the buyer will be responsible for obtaining finishing permits and completing fixturing the Unit for occupancy at the buyer’s cost and expense
- Design plans for completing a Unit for occupancy must be approved by the builder at the cost of the buyer
- Rules and regulations that restrict the permitted hours of business operations and parking
- Shared facilities agreement with another condominium or property that are part of the common expenses payable by unit owners
- The units that have exclusive use of common elements such as, loading docks, corridors and stairwells
Keep in mind that if the condominium plan hasn’t been registered, then the documents included in the Disclosure Statements may change once the condo is registered.
In the event that there is a material change to any of the condominium documents provided as part of the Disclosure Statement, then the purchaser’s only remedy under the Condominium Act will be cancelling of the Builder’s Agreement and the return of the deposits paid by the buyer.
Be Aware Of The Numerous Closing costs
There are a lot of extra hidden costs payable to the builder on closing when purchasing a new unit. These costs are for development charges, security deposits, fees for installing and connecting utility meters and services, status certificate fees, Costs of an appraisal, sellers legal fee if you have delayed the closing, Architectural review fee and more.
At the end of the day these amounts can come up to hundreds or even thousands of dollars. All the costs are listed as adjustments to the purchase price on the builders agreement. Often you will find that the purchase price is subject to a proportionate gross-up calculation based on the addition of certain common elements. This could also end up being a significant amount. Your lawyer can try to negotiate to either remove some of these adjustments or to have a cap on them.
Harmonized Sales Tax (“HST”)
It is highly advised to speak to your lawyer and accountant regarding HST. Typically the purchase is exclusive of the HST, however every purchase may differ.
Status certificate
Reviewing of the Status Certificate by the buyer’s lawyer is essential to purchasing a resale unit and imperative that the resale agreement should include such a condition. The information that is disclosed in the Status certificate is extremely important as it reveals everything related to the condominium and the unit including the disclosure statements. The status certificate also discloses the amount of the common expenses payable by the unit, whether there are any lawsuits or judgments against the condominium, an increase in the budget and common expenses payable by each Unit, special assessments and anticipated increases in the amounts contributed to the reserve fund.
Any of the above-noted issues disclosed in a Status Certificate, will result in an increase in the common expenses payable by each Unit. For example, the Status Certificate may disclose that the board of directors has decided to levy a special assessment due to an unexpected expenditure that cannot be fully paid for by the money in the reserve fund. A special assessment is an additional payment that all unit owners will need to pay based on their proportion of common interest in the common elements of the Condominium.
In addition to the increased cost for all unit owners, the concern with a special assessment is that it may be caused by the board of directors’ failure to have a reserve fund study completed in a timely manner as required by the Condominium Act and/or mismanagement of reserve funds.
This is why seeking legal advice of a lawyer is crucial and to understand and review the condition of the condominium before binding the agreement.
