With the market as busy as it is, including purchases of new homes from builders, we thought it would be important to address a significant mistake we are seeing. Many people know that there is a 10 day cooling off period when a buyer buys a new build Condominium. Unfortunately, they also presume that this applies to new home freehold purchases. It does not. The 10 day cooling off period applies only to purchases of new Condominium units. It does not apply to the purchase of a new freehold home from a builder. If a buyer wishes to have a chance to review a new freehold home purchase agreement from a builder there must be a clause in the agreement making the transaction conditional on Solicitor’s review of the new home purchase agreement. It is not automatic, like it is with the condominium. With all purchases of new homes we recommend the inclusion of a Solicitor’s review condition, especially with all of the extra charges and other builder advantages we are seeing in these agreements. Even if it is hard to change these agreements in the current market, it is still helpful to know what is in them.
As for the 10-day cooling off period for new condominiums, please also note the following:
1. It does not apply to resale condos.
2. It begins on the latest of the date that the buyer receives: the Fully Signed Agreement, Disclosure Statement or Condo Buyers Guide.
3. 10 days includes weekends and business days.
4. The notice of termination must be in writing.
CBC News : Toronto woman’s life savings in limbo as new owner of townhouse development refuses to honour agreements
With shortages of inventory remaining, Assignments remain an increasingly popular purchase option. We do many Assignment transactions, but the case above highlights the importance of having the Assignment Agreement fully reviewed and drafted with the help of a lawyer. Here, the new buyer remains in limbo for two reasons. One is because she does not know whether the project will ultimately go ahead. The other is because she purchased on Assignment and paid all of the Assignment fee (profit) to the original buyer when she took the Assignment. While in most cases this is not a problem because projects get completed, in this case the original builder sold the land and the new builder may not honour the original contract. If the new builder is allowed to do this she may not get her Assignment fee, if at all, without suing the original buyer. Only deposits paid under the original contract are protected. This is why we always recommend that only the equivalent of the deposits paid under the original agreement be paid to the original buyer on consent and that the Assignment fee (profit) be paid only on final closing. In this example, while she would lose the value of the unit if the project does not go ahead, she would at least not also have to worry about getting the Assignment fee back from the original buyer. It is important to note that this risk is lessened the closer the project is to completion. In this case it seems that ground was not even broken. In cases where construction is underway or occupancy has been granted there is less risk to the new buyer of paying the Assignment fee on consent, although there always remains some risk. The closer the project is to completion the lesser the risk. Please also note that in this market Sellers are often demanding and getting the full Assignment fee paid on builder’s consent to the Assignment.
Title Tips is not intended and should not be relied on as legal advice. For specific questions or situations, please feel free to call John Zinati for assistance. If you wish to unsubscribe from our mailing list please simply reply “unsubscribe” and we will remove you from our list. Copyright: zinatikay.