When purchasing a pre-construction property, it is essential to be aware of the legal implications that stem from the agreement of purchase and sale. This article highlights the invaluable advice which can be provided by a real estate lawyer prior to embarking on such a transaction.

In Ontario, builders are required by law to provide a “cooling period” for purchasers. The right to a cooling period is confirmed by Section 73 of the Condominium Act. This period affords purchasers the opportunity to have their selected counsel review the agreement of purchase and sale and, upon review and discussion with their counsel, to terminate the transaction if they are ultimately not agreeable to the terms posed by the builder, following which, a release of their deposits is provided. Time management can be crucial, as following the cooling period, this opportunity is no longer afforded to the purchaser. The cooling period is mandated at (10) days for condominiums and can vary with respect to freehold properties.

Benefits of having a real estate lawyer review the agreement of purchase and sale within the cooling period:

Of most significance, real estate counsel can highlight and pinpoint clauses or language that is ultimately not favorable to a prospective purchaser. This would allow for, following a discussion with the purchaser, counsel to conduct negotiations with the builder to eliminate, alter, or add language to the benefit of their client prior to the agreement becoming firm. Highlighted topics of note that can be discussed are warranty implications afforded to the purchaser, restrictions, and obligations of the purchaser as well as the builder, additional costs embedded within the agreement as well as acts or omissions that may place the purchaser in default.

A crucial item to assess and discuss with counsel prior to your agreement becoming firm is adjustment costs – builders typically use the term ‘adjustment’ to include any additional charges that a purchaser is to pay in addition to the purchase price. Typical charges will include, but are not limited to:

• The Tarion enrolment fee
• Costs associated with utility meters and installation
• Tree planting fees
• Levies (charges imposed by the Town and Municipality where the property is located)
• Increases in existing levies and development charges.
• Mortgage discharge fees

It is of note that HST is payable in addition to these sums, and often, the agreement will not disclose the monetary sum associated with same – an important item that should be addressed with the builder, negotiated, and effectively capped and or deleted, provided the builder permits same.

Until recently, these types of charges would be dispersed within the agreement and often overlooked by prospective purchasers. Builders are now required to list all such charges on a Schedule B to the Tarion addendum which forms part of the offer to purchase. This is a costly section of the offer that should be discussed at length with a lawyer, prior to firming up and within the cooling off period, should one be provided.

Discussing your agreement of purchase and sale with selected counsel can provide a sense of comfort for a purchaser. Real estate transactions can often feel complex and stressful, and the discussions had with counsel prior to being bound to an offer to purchase allow for a purchaser to feel secure in knowing not only the additional costs to assess, but timelines, restrictions and rights in favor of the builder that can have an effect on the course of the transaction.

In conclusion, when purchasing a pre-construction agreement in Ontario, it is highly recommended that purchasers take advantage of the cooling period and have a real estate lawyer review their agreement with sufficient time to discuss the comments issued. A lawyer can identify potential issues, aid in the negotiation of favourable terms, ensure that a purchaser is aware of all the legal implications of the agreement and provide a sense of stability during what can be a complex and nerve-wracking process.

Undeniably, the selection of a real estate lawyer prior to embarking on a purchase transaction and engaging in a detailed review of their offer to purchase can save a purchaser from what could be costly oversights down the road, as well as ensure that they are making a fully informed decision about one of the most substantial purchases in their life.

If you have any further questions about pre-construction properties, or you would like to speak with someone for further legal real estate inquiries, please contact Woitzik Polsinelli’s lawyer Jonathan Dippolito at jonathan@durhamlawyer.ca

“This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see or speak to a lawyer. Each case is unique, and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.”