Below is the short explanation through the process of buying what is known as pre construction from the builder.
Most developers will start the selling process as soon as they have purchased the land and have dealt with the preliminary building permit.
Some realtors have close connections with the builders and as a result they are on the builder’s VIP agents list. This is to say some agents are being notified by the builders before the public about a new development coming to a neighbourhood.
Actual Buying process
As a buyer you will get to see the floor plans, the square footage, the floor it is at and the deposits required by the builder during a set time frame. Each builder has its own deposit structure and a set of conditions for their potential purchasers.
An example of a builder deposit structure could be as follows: 5% upon signing, 5% at 120 days, 5% at 180 days, and the final 5% at 360 days. At this stage the builder will ask you to go to your bank and secure a mortgage. This mortgage will kick in upon completion of the building and final registration. That is when you get title to your unit.
Upon signing the contract, you will get 10 days, known as the cooling off period. It is highly recommended that you send the contract to your lawyer for his/her review. At this point the builder will also request a bank mortgage approval, or if you do not require a mortgage, a letter from the bank mentioning sufficient fund is available by the buyer to close the transaction when the building is complete. This letter is acceptable by most builders. They are simply protecting themselves against un-qualified buyers who may not be able to close when the construction is complete.
Upon the lawyer’s satisfactory review of the contract, and obtaining approval from your bank, the deal will firm up after expiration of the 10 days cooling off period.
From this point you just wait for the builder to start and complete the construction. Usually 2-3 years, depending on the size of the building and number of floors. Once it gets to a certain stage of the construction, normally you will receive notification to go for your colour selections. Depending on the developer, this could include choosing colours for flooring, tiles, cabinetry, bathroom vanities etc. At this stage you may be able to ask for some upgrades as well. Usually the builder’s upgrades are more expensive than the market price, which may be worth it for the convenience. In most cases the builder will add the price of the upgrades to the purchase price and subsequently it be calculated through the mortgage process.
Pre-Delivery inspection
At this time you will meet a builder rep at the unit to go through any deficiencies or incomplete work and you will be given a copy of the items identified. In return, the builder will complete the work and make good of the deficiencies in a timely manner, most of the time before the occupancy, though often during the occupancy period.
Occupancy period
At this point you will be given the possession of your suite. It could be used by yourself or immediate family. There will be no title at this time, so the builder will ask the buyer to obtain few personal cheques to cover the cost of maintenance fee, property tax and the interest on the unpaid purchase price (the purchase price minus the deposit paid) to the builder to cover the period from the occupancy to final registration. This period is usually 3-6 months long.
The higher up in the building your suite is located the later your occupancy date, and therefore shortening your occupancy period.
Final registration and statement of adjustments
Upon the registration of the building and forming of the condominium corporation, you will receive a letter from the builder notifying you the date for final closing. You will need to notify your bank to make sure your lawyer receives the funds on time to be able to close the deal. Few days prior to closing, your lawyer will send you what is known as statement of adjustments. Few items to mention on this Statement are those like purchase price, deposits paid to the builder, HST, adjustments for the property taxes and condo fees, payable levies, utility meter cost, etc.
HST
You may decide to rent at the time of the occupancy (Builder Permitting). If so, consult your lawyer to learn about the HST implications. You may have to arrange for extra cash to be paid out on top of your closing cost upon final closing for the HST. This is if you have already rented or have intentions of doing so. This amount may be reimbursed to you in full or partial upon submitting an application form and sending the necessary documents to Canada Revenue Agency.
Assignment
Some builders allow assignment during the construction or during the occupancy period. This simply means that upon paying all your deposits to the builder, you can assign the contract with all terms, conditions and obligations to a new buyer. In a decent market the price of an assignment is the original price paid plus any profits to be had on top. Assignments could be subject to HST depending on few factors such as your initial intention at the time of the purchase. Consultation with a real estate lawyer is highly recommended.
Levies
You will be charged levies on any pre-construction purchase. Basically it is the amount of new development charges or other levy or similar charges assessed against the unit or the property. Builders normally will Cap these charges at the time of your purchase and will include it on the statement of adjustments at the time of the final registration.
