Buying a pre-construction condo is a great way to get in on the ground floor, as you can typically buy a suite for a better value than resale. In addition to getting a brand new unit, you also have greater control over your suite and can choose the features and finishes you prefer. However, the pre-construction buying process, particularly with condominiums is not as straight forward as buying resale, and can be overwhelming if you’re new to it.
To help novices enter the pre-construction game, we’ve developed your one-stop cheat sheet. Read on and show up to the Presentation Centre asking all the right questions.
One of the hardest things about buying a Pre-construction condo is not being able to walk through your new unit. It can be scary to make such a huge purchase without seeing it for yourself. The Presentation Centre is where you’ll be able to have all your questions answered. Here you can view the model suites or vignettes (suite mocks-up), touch and feel the finishes and upgrade packages, view the scale model of the project, experience the area, view renderings of the building and amenities, chat with the sales representatives on pricing and find out more about the builder. You can also get hard copies of the floorplans at that time, so you can examine them with your friends and family to determine which is right for you. Never had to read a floorplan before? Check out Condo City’s handy guide.
Amenities and Maintenance Fees
A huge part of a condominium community are the building’s amenities. In addition to contributing to your monthly maintenance fees, these shared spaces will be a part of your new lifestyle. It’s important to really think about what you want and need out of your building. Are a gym and pool essential to your new home or are you happy with only an outdoor terrace with a BBQ? Make sure you consider what amenities are included in the building as the more amenities the building offers the more expensive your maintenance fees can be. Maintenance fees are calculated by sq.ft., so the larger your unit, the more fees you’ll be paying. Keep in mind that the fees are relatively low when the building is new, as the cost of building maintenance is being estimated, and may increase at a later date.
Some building management companies may ask you to contribute to the building’s reserve fund/emergency fund at the time of closing. Although it’s hard to conceive paying yet another fee at this time, this is a sign of savvy condo management. This fund is pool of money kept for emergencies in the future, so that the condo fees don’t sky rocket if a large repair is needed.
Depending on the builder, project and suite, a locker and parking spot may or may not be included with your purchase. Be sure to inquire about that before you buy.
When you purchase pre-construction, your suite will come with standard features and finishes. This refers to the materials, appliances and flooring used in your suite; particularly in the kitchen and bathrooms. Be sure to ask about what comes standard in your suite and the upgraded options when viewing the model suites and finish packages. Depending on the time you buy, decor upgrades or “decor dollars” that you can use toward upgrades may be an incentive with your purchase. Either way, you should leave some room in your budget for these upgrades.
Deposit schedules often differ greatly depending on the timing of your purchase, the builder and the project. Be sure to discuss with the sales representatives what the current deposit schedule is for a project and review your finances to see if you can realistically make those payments. Typically, an initial payment will be required within 10 days of purchase, followed by a percentage within a few months and so forth; but the timeline and amounts are set by the builder and differ greatly.
Also known as interim closing, your interim occupancy period begins the day you occupy your suite and ends the day you take ownership and the building is registered. During interim occupancy the building is typically still under construction and most of the common elements are left partially unfinished. The amenities and common spaces will be completed once most of the residents are moved in. Occupied residents must pay a monthly fee to the developer; as they do not officially own the suite yet. Please note that these fees are not credited to the final purchase. Check out our comprehensive guide on interim occupancy here.
Once a building has passed all the city’s inspections it can be officially registered. At this time (your closing day) condo ownership is transferred to the homeowners, who can now secure mortgages. The property management company also takes over at this time, maintaining the shared spaces and providing the appropriate services. Keep in mind that you’ll be closing at this time, so your closing costs (see below) will come into effect in addition to possible contributions to the reserve fund of your building, as stated above and possible fees associated with registering the building.
Condo completion is a huge factor when determining if a project is right for you. Typically, the earlier you buy into a project the lower the purchase price will be. Some condo projects may take up to 5 years to be built so once all of your deposits have been made you will have to maintain living accommodations until your occupancy day. Be realistic when looking into new condos about how long you’re willing and can afford to wait to move in.
New condos are subject to HST. If you’re an end-user, you may qualify for an HST rebate, make sure to get advice from your lawyer or realtor about whether you qualify for the rebate before you buy.
Purchasers can sometimes change their minds and want to sell their condo before occupancy or registration. This can be for any number of reasons, from emergency circumstance to investors who are looking to cash in early. Because purchasers don’t actually own the condo yet, they can’t sell it until the building is officially registered with the city. However, they can sell their agreement with the builder to another purchaser. This is called assignment. Typically, the builder will charge a fee to the purchaser for doing this.
With pre-construction condos, part of your closing costs include Builder Fees, also called Levies or Development charges. These are fees that are charged to the builder by the city on a yearly basis and are dispersed among the purchasers of the building. A number of factors go into these fees, including length of the project, number of suites in the building, and any increases in municipal fees; so it is nearly impossible to predict what they will amount to at closing. Be sure to ask your real estate lawyer about “capping” your development/levy/builder fees in your Purchase Agreement. By doing this, a set amount will be determined between you and the builder, and you can set your closing costs aside accordingly and avoid any unpleasant surprises.