The rising costs of resale condos in Toronto have increased the number of pre-construction units being sold. Between 2018 and 2019, resale condo prices increased almost 11% per square foot, which resulted in an increase in people looking to purchase pre-construction units. Last year in Toronto, there were nearly 60,000 deals made. If you are one of the many people drawn to the benefits of a pre construction condo, it’s in your best interest to do your research before you shake hands with the builder. Let’s look at the most important considerations before you buy:

Less Money Up Front

When you purchase a pre-construction condo, you generally pay 20% down, which can be spread out over several months. They set a payment schedule up to allow home buyers more time to pay. This is an example of a deposit structure you might expect to see:

The condo itself may take months or even years to be completed . Something to note; While the building is still being constructed, you cannot pay your mortgage payments and you cannot sell the unit.

Closing Costs

New condos have fees attached to them that resale condos do not; These may include:

• New Home Warranty Fees
• Utility hookup fees
• HST
• Assignment fees (only if you flip your unit or sell if before the final closing)

They do not charge these fees for all pre-construction sales and you may even find them worked into the cost of your condo, every builder is different. The HST is an interesting fee because you may qualify for the GST/HST New Housing Rebate with the CRA. Claiming the rebate can be a difficult process so we recommend speaking to your accountant to see if you meet the CRA standards.

Cooling-Off Period

In Ontario, you have a 10-day cooling-off period after you have paid your deposit. The cooling-off period allows you to walk away from the sale without consequence should you change your mind. This gives you time to consult with a real estate lawyer and to talk to your accountant about HST rebates so you can decide if this condo is the right choice for you.

Keep in mind that the 10-day period includes weekends and if you choose to walk away, you must formally submit a letter to the builder. It’s recommended you find a real estate lawyer to help you with this letter for peace of mind.

Interim Occupancy Period

You may be able to move into your unit before they complete the building and it’s registered, we know this as Interim Occupancy. Since the building is not yet complete, you cannot make your mortgage payments and instead pay the builder “rent” every month to live in your unit.

This may not sound fair to you but the occupancy fees are often lower than what you would pay for rent elsewhere, so it’s an appealing offer. Be prepared for there to be loud noises and the amenities may not be open for use just yet.

The interim occupancy and occupancy fees are monitored by the Ontario Condominium Act.  The fees will vary from builder to builder, it’s best to consult a real estate lawyer before you sign any contracts.

Contact Cameron Miller with Shop Toronto Condos to find out if a pre-con is the right choice for you.