Take Advantage of the 10-Day Cooling Off Period
In Ontario, every buyer of a pre-construction condo is entitled to a 10-day cooling-off period – also known as the “rescission period,” this is the time to have an experienced lawyer review the purchase agreement and to solidify your mortgage approval. While you may have up to 30 days after signing the sales agreement to provide the developer with your proof of mortgage approval, if you are unable to secure a lender and you have surpassed the 10-day cooling off period, you would likely be unable to get your deposit back. When purchasing a freehold property, the rescission period is dictated by the developer – in super-hot markets it can sometimes only be a 24-hour period!
Be Realistic About Condo Fees
Condo fees advertised by the developer are their best guesstimate, and sometimes underestimated in order to make the development more attractive to buyers. These fees are estimated several years in advance, so the vendor can never be sure how much exactly it will cost to maintain the building at the time of completion. Consider the fee advertised as an approximation, as the actual amount will most likely change due to inflation, changes in regulations, and rising costs of labour. So, budget appropriately to make sure to you can cover the potentially higher maintenance fees when time comes.
Prepare For The Interim Occupancy Period
The period of time between the date of occupancy and the registration date when you buy a pre-construction condo is known as “interim occupancy.” The occupancy date is the date you get the keys to the unit and have the legal right to occupy the property, but not ownership. Once the building reaches a certain percentage of occupied units the developer can start the registration process with the City in order to declare the building as a condominium. When the building is registered, you would become a homeowner and start paying your mortgage, property taxes and condo fees. Interim occupancy can last anywhere from a few weeks to over a year, but most often it’s just a couple of months. It’s important to be prepared for this period, as it comes with monthly expenses called interim occupancy fees. This fee is essentially “rent” paid to the developer and is made up of three parts: interest on the remaining balance of the purchase price of your condo, municipal taxes for your unit, and condo fees for your unit.
It’s essential to note that most developers do not allow the rental of the property during this interim occupancy, which is detrimental if you are an investor since this could result in months of vacancy and lost income. Make sure to negotiate with the developer and attain the right to rent your unit if that’s the reason for your purchase.
Think about resale
You owe it to yourself and your pocket to make the best investment decision possible. This might seem pessimistic, but I always think in terms of the “worst case scenario” situation – if you must re-sell your property in the middle of the winter, in a slow buyer’s market, what can you do now to give yourself the best chance at a successful sale in the future?
One thing’s for sure – layout matters. Only taking into consideration the total interior square footage is simply not enough. Look for layouts that avoid wasted space in transitional areas like hallways, or acute angles that create unusable wall space. Ask yourself – does the layout offer an obvious furniture layout, or will I be forced to purchase special furnishing items to work with this layout? Don’t just rely on the developer’s depiction of furniture on the floor plans – often those pieces are not to scale.
When looking at a floor plan, make sure to note location and size of the windows and try to avoid a strictly northern exposure. A south-west facing exposure will typically get you the most light. I have yet to come across a buyer that hates natural light or nice views!
Research the area around your new condo and know what’s coming up. Does the same developer own the land around you? What is the zoning of the lot across from you and the timeline of the potential construction that may take place? Future development may affect the value of your property in a positive way but do you personally want to deal with construction noise and dust? What if you plan to resell the property while there is construction taking place? This may affect your resale value.
What’s above the condo you are considering purchasing? If it’s a unit of the same layout, your chances of not having additional bulkheads in the middle of your living space are way better than if the floor plan above you is different. For example, if the kitchen above you does not match the location of yours then there might be some additional bulkheads needed to cover that plumbing, which would then lower your ceiling in more areas than desired. Also, be mindful of your unit’s location of the floor plate – resale potential might be affected negatively if your condo is near the garbage chute or right beside the elevator. I would also suggest avoiding proximity to common amenities. Fitness rooms can create a lot of noise and some developers don’t go the extra mile to sound-proof those spaces.
For most of us, purchasing real estate is already an expensive venture so it’s important to know whether you will be faced with the extra 13 per cent of taxes to pay on closing. With most big developers, the sales taxes are included in the price of the home. In which case, the homeowner agrees to assign all tax rebates to the developer. The developer then applies for these rebates on the buyer’s behalf. However, if the purchaser does not qualify for the maximum rebate amount provided by the federal and provincial governments, then the difference will be charged back to the purchaser.
Keep in mind though, if you are buying the property for strictly investment purposes and plan on renting it out right away then you will be responsible for paying those taxes on closing and then going through the rebate process yourself. Also important to note—there is a maximum rebate of $24,000. Of course, I advise that you seek an accountant’s advice regarding this matter.