Legal Briefs

By Timothy C.R. Vanular

If you're looking at buying a new home or condominium it might surprise you to discover that a purchase of this nature presents unique legal details for any potential buyer. For instance, did you know often there are two closing dates for a condominium? And have you ever wondered just how important a "registered Plan of Subdivision" can be to a would-be owner? Here's what you need to know.

Try to have the offer reviewed by real estate lawyer either before you sign (preferably), or make the Agreement of Purchase and Sale conditional upon your lawyer's approval.

Make the agreement conditional upon obtaining satisfactory mortgage financing and either try to get the builders' on-site lender or your own lender to "guarantee" your interest rate until the final closing date.

Be warned, with respect to new condominiums as there are usually two closing dates. The first being the interim or occupancy closing date where you take possession but not title to the unit and the second being the final closing date when you get actual title to the condominium and you then are able to register your mortgage. The two dates can be in some cases, as much as 18 to 24 months apart therefore try to get the lender to guarantee the interest rate until the final closing date wherever possible.

If you need to sell your house in order to close the purchase make sure the offer is conditional upon the sale of your own home.

Do not go in firm (ie. without a condition in the offer, making the offer subject to you being able to sell your own home) unless you are absolutely able to either purchase the house or condo on an all "cash basis" from your own resources or you have met with your lender and they have given you a written unconditional mortgage commitment that they will lend you the money to purchase the new home even if you don't sell your existing home prior to closing. Even then, to proceed without this condition is extremely risky and you should always carefully review the Agreement with your lawyer and your lender before committing to or signing a firm deal. This is especially important because housing prices are extremely high right now and interest rates low. This may soften in the future prior to the new house or condominium being built. You may not get what you anticipate for your own home if you wait to sell until your new condominium or house is built. The closing date of the new home or condominium could be as much as one to three years from the date you signed the offer.

Check with the builder/developer and the local municipal building and zoning department prior to signing the Agreement of Purchase and Sale to see if the Plan of Subdivision for your new home has been registered, or with respect to condominiums, the anticipated date of registration of the Condominium Plan and how many houses/condominium units the builder has sold.

The registration of the Plan of Subdivision or Condominium Plan will affect: a) when the deal is likely to close and whether it will be likely that the builder may have to extend your closing date in the future; b) the possible rise in the interest rates and the resulting effect on your mortgage prior to the closing date of the transaction, and; c) the possible softening or downward pricing/resale value of your own home. Wherever possible, choose a subdivision where the builder has already registered the Plan of Subdivision or a Condominium where at least 65 per cent of the units have already been pre-sold or the Condominium Plan is close to being registered by the builder, and you will have less risk of being interest rate sensitive on both your mortgage and on the resale price of your own home.

Watch out for hidden builder costs in the Agreement of Purchase and Sale. Discuss these with the builder's sales person and your lawyer and try to negotiate or have the Builder "cap" costs.

Note: All information contained herein is not intended to be specific legal advice and is given for information purposes only. You should always consult with your own lawyer prior to signing any Agreement of Purchase and Sale. Mr. Vanular assists vendors, purchasers, builders, developers, lenders, and agents with all of their various real estate needs from consulting, advising and handling transactions on an individual basis to conducting numerous seminars at banks and real estate offices. He can be reached either at law.office@bellnet.ca or (905) 427-4886.