1. What is a 10-day cooling period?
A condo is a big purchase. Sometimes after all the high speed action of buying the condo, you might change your mind and decide this is not right for you. In Toronto, you automatically get a 10-day cooling off period starting the day you sign the contract. During this cooling period, you can go back to the builder and cancel the agreement and get your deposit back. For more info, read about it in our previous blog post.
2. What is the difference between Interim Occupancy and Registration?
Interim occupancy is the period of time between the day you receive your keys to your unit (when you can move in) and the day the building gets registered as a corporation (when you take ownership). Typically, this can last between six to eighteen months, depending on the project. During this time, the buyer pays an Interim Occupancy Fee regardless if the buyer decides to live in the suite or not. The fees paid at this time is not credited to the final purchase price. The Builder will request post-dated cheques and is usually paid out monthly.
During the Interim Occupancy Period, the builder has a number of regulations that must be adhered to. These include providing the services that the condo corporation will take over once the building is registered, such as garbage disposal, maintaining the property including HVAC, fire alarms, etc.
Registration (final closing) date is the date when the title is transferred from the builder to the buyer. At this point, the interim occupancy ends. The property management company will take over the management of the condo building. This is where the buyer settles the remaining balance of your purchase (typically by means of a mortgage loan), pay development levies, Land Transfer Tax, legal expenses, and HST if it’s owing.
3. What is the difference between a occupancy fee and a mortgage?
Cost during Interim Occupancy (Occupancy Fee)
- Interest (of the unpaid balance of your suite) of the builder’s mortgage
- Projected Condo Fees
- Estimated Property Taxes
Cost after Registration
- Your Mortgage (Interest and Principal)
- Condo Fees
- Property Taxes
Interim Occupancy is generally cheaper than your overall cost after registration. This is because the Interim Occupancy Fee does not include principal payments. The cost of ownership for your suite is reflected in this amount. This cost does not change during Interim Occupancy or after Registration. The only difference between the two is who you pay it out to (Builder during Interim Occupancy or Mortgage payments to your bank, Condo fees to the property management company, and property tax to the city.
It’s a misconception that a builder profits or has any benefit to gain from extending this phase in the building of a condo. In fact, there are stipulations in the Condominium Act around the calculation of the occupancy fee which attempt to prevent the developer from making a profit. It is in the builder’s best interest to transfer title as soon as possible. The builder only get paid when the building gets registered (i.e. the buyer’s mortgages gets transferred to the builder).
4. When do I need to arrange a mortgage?
You would want to start shopping around for a mortgage 1 to 2 months before Registration. The builder will inform you on when the registration date will be. Make sure you shop around for the best available mortgage rates. You would have had to secure a mortgage pre-approval during the 10 day cooling period. You can reach out to the mortgage specialist that help you out then and see if what the new rates are.
5. Is my deposit protected?
Yes, there are different levels of deposit protection available.
The Condominium Act requires a builder of a condominium project to hold monies received in a trust account. The vendor does have a right to have some or all of the deposit monies released from trust but only if the builder has arranged for acceptable security to protect he return of deposit obligation.
If for some reason the vendor is unable or unwilling to return the deposit, then the buyer is entitled to turn to the trustee who was obligated to hold the deposit monies in trust. The buyer can then make a claim to the trustee (usually a lawyer) for return of the deposit from trust accounts maintained by the trustee.
If the deposit monies are no longer in trust, then the purchaser has an alternative protection being the third-party backstop of Tarion and/or an insurance company. Ontario New Home Warranties Plan Act (administered by Tarion) covers home buyers before they move into their new home with deposit protection up to $20,000 for condominiums and $40,000 for freehold homes. You can also hire an experienced real estate lawyer who specializes in condo law. There are also insurance products available to condo buyers to further protect their purchase, which is something buyers can discuss with their lawyers.
6. What are the rules around builder delays?
Builders are governed by Tarion which enforces the Ontario New Home Warranties Plan Act and Regulations. This act stipulates different requirements that mandate builders to let purchasers know if there will be any delays. They owe different amounts of notice depending on where they are in the construction process. For a comprehensive breakdown on this visit Tarion.com. Details about the delayed occupancy warranty are provided in the Tarion Addendum attached to your purchase agreement. If you are unsure about your rights regarding occupancy delays you may wish to seek the advice of a lawyer.
7. What are development Charges or development levies?
Development charges are issued to a builder from their city when the developer receives their building permit. These charges are paid by the developer to fund infrastructure including roads, libraries, parks, education, transit and more. Development charges (or development levies) are taxes imposed by the city and passed on to purchasers of newly built property. These taxes are due at the time of final closing (registration).
One of the most important clauses in your agreement is to ‘cap’ these levy charges so that they don’t get out of control. For example, if the city charges the builder $20,000 of levies and your Agreement of Purchase and Sale has a ‘cap’ of $5,000 then you only own the $5,000. The builder ends up paying the remaining $15,000.
8. Who is entitled to the HST rebate?
Harmonized Sales Tax was implemented in Ontario on July 1, 2010, which raised the tax on new homes in the province from 5% (GST) to 13% (HST). In an effort to help homeowners deal with the increased cost of buying a new home, the Government introduced a rebate program to reimburse buyers for a portion of the additional new home tax.
As of summer 2010, new home buyers in Ontario are charged 13% HST on their purchase, which consists of a 5% federal tax and 8% provincial tax. The new house HST rebate in Ontario essentially rebates 75% of the Ontario portion of the HST, up to a new home purchase amount of $400,000. This results in a maximum rebate at a provincial level of $24,000 ($400,000 x 0.08 x 0.75). It is also possible to obtain a federal rebate of up to $6,000. The maximum rebate possible federally is an additional $6,000.
If you’re buying as an investor and are going to rent out the property for a minimum of one year, you’re entitled to an HST rebate for the amount of the HST charged (New Residential Rental Property Rebate). Upon registration, when you close and pay all of your registration fees, you will also be mandated to pay HST. You will get a full refund 6 to 12 weeks after registration provided you have a one year lease. Your lawyer will be able to assist you with rebate forms. If you do not rent out your property for the minimum one year you are not eligible for the HST rebate. If you sell the property before the one year minimum, the HST must be paid in full.
If you are buying as a home owner, you will receive the HST rebate based on the fact that you or your immediate family will occupy the new property as a principal resident for at least one year (New Home Rebate). In most cases, the buyer will receive the HST rebate in a form of a discounted purchase price. If the new property is sold before the initial one-year window, the Canada Revenue Agency (CRA) will require you to pay back the HST rebate in full, which can add up to as much as $30,000.
For the latest information, please visit GST/HST New Housing Rebate. Better yet, seek out legal and tax professional advise.
9. When do I pay my closing fees?
Your closing fees are due on the registration date of the building. That includes your Land Transfer Tax, development charges, legal fees and HST, if owing.
10. What is an assignment clause? Do I need it?
One of the key items to secure in a pre-construction condo purchase is an assignment clause in the Agreement of Purchase and Sale. This clause allows allows the purchaser to assign the contract to another purchaser prior to the building’s completion. It’s generally a couple of years between the VIP sales event of a pre-construction condo to the time the building is ready for registration. The assignment clause allows you to ‘sell’ your rights to the contract to a new purchaser in an event that your situation changes. This clause is generally one of the key incentives Toronto condo builders give during a VIP sales event.
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