By Matt Leask -published in Homes and Land Magazine Oct 2021
Whether you are a first-time home buyer, looking to downsize, or simply prefer the benefits of condo living, you may be considering purchasing a condominium unit instead of a traditional freehold home. With changes in the Ontario housing market, smaller markets such as Niagara have seen a substantial increase in the number of condominium developments. Traditionally, large urban centers like Toronto and surrounding “commuter” cities have been the main drivers of condominium development. Stats for 2020 and 2021 have shown that the pandemic induced exodus from crowded cities had led to a slow-down in the condo market for places like Toronto and Hamilton. Conversely, population growth in smaller markets like Niagara have led to an increase in this type of housing.
For homebuyers who have decided that condo living is the right choice for them, should be aware of the differences between purchasing a condo and a traditional home, and the significant differences between purchasing a pre-construction or “new” condominium unit and one that has been previously occupied, a “resale” condo.
If you’re considering purchasing a pre-construction or new condominium unit, there are some things you should consider. There are many benefits to a new condo, such as the ability to select floorplan, location, finishes, and upgrades. You will also receive a new home warranty under Ontario’s New Home Warranties Plan. Not to mention, it is widely believed to be a great financial investment, as condo prices tend to rise as the development nears completion.
In buying a new condominium, you will most likely be presented with the builder’s standard form of purchase contract. Unlike the standard OREA form of purchase and sale agreement, this contract will be lengthy and tailored in favor of the builder. Additionally, you will receive a number of condominium documents including the rules and regulations applicable to your unit. Its important you read and understand these documents, and just as important to have your realtor and lawyer review and provide their advice.
There are some cons of buying a pre-construction unit that you should be aware of. Construction could take years, and during that time your initial deposit will be tied up for the duration of construction. The builder has the right under the contract to extend closing for any number of reasons as long as they provide buyers with notice. Its important to review the statement of critical dates attached to every new build condo agreement.
You may be required to take occupancy while construction continues in the development. Not only is this disruptive, it requires you to pay “occupancy fees” to the builder before you receive title. You will not be able to get a traditional mortgage from a bank until the condo is registered and title is transferred. This can take a toll financially on a buyer.
On the flip side, buying a resale condominium also has its pros and cons. Resale purchases allow you to see exactly what you’re purchasing, you won’t have to wait, and your deposit will be much less in most cases. Of course, you are buying a resale, so you won’t receive a warranty and need to satisfy yourself as to the physical state of the unit. You should also have a look at the age and condition of the common elements. If major repairs are required in the future, you could be footing the bill by way of increased common fees.
In a resale you will receive a copy of all condo documents and a “status certificate” when entering into an agreement. Make sure your offer includes a condition for review. This will allow you to ensure you are comfortable with the rules and regulations in the condo development. You’ll also have a chance to look at the budget to determine if your condo fees are likely to take a jump after closing.
We always recommend you get good legal and other professional advice before signing an agreement to purchase real estate. The intricacies of condominium buying make it all the more important.
Matt Leask is a lawyer within Lancaster Brooks & Welch LLP’s Real Estate Department. If you have questions about buying or selling a property and want to understand your rights on a contract, you may contact him at 905-641-1551