Delays are an inherent risk involved in buying a pre-construction condo. Both residents and investors should understand the fundamental aspects of pre-construction condo occupancy including potential delays, buyer rights, and other implications. This article offers an introductory analysis of these elements to ensure buyers are informed, knowledgeable, and risk-averse in their pre-construction condo purchase.
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The Landscape of Pre-Construction Condos in Toronto
As a distinctly urban metropolis, condos have historically played an influential role in shaping Toronto’s skyline and real estate profile. This trend has only continued in response to the city’s rapid, ongoing population growth. Toronto’s downtown core is dense with existing and emerging condos, however, some of the city’s more suburban areas – particularly Etobicoke and West Toronto are welcoming a healthy amount of new developments as well.
Although Toronto’s influx of pre-construction inventory has offered a number of advantages for buyers, the busy industry has also faced new challenges in response to elevated demand. Often these industry-facing obstacles have a downstream impact on buyers. More specifically, they can cause minor or major delays to a buyer’s occupancy.
Why Pre-Construction Delays Occur
While not uncommon, pre-construction delays can be complex and multifactorial. There are many intricacies involved with developments of their scale and disruptions may occur before, during, or after the building itself is constructed.
For example, issues or discrepancies related to red tape items such as permits, certificates, and inspections, may halt or slow a project before construction has formally begun. Further, unforeseen challenges like weather conditions, labour shortages, or supply problems can also push back completion timelines.
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How Delays Are Regulated
In Toronto, buyers of pre-construction condos are protected by the Ontario Condominium Act and Tarion Warranty Corporation, a government-regulated body that oversees new home warranties. Builders are legally required to provide specific information about potential delays in the purchase agreement.
Defining Key Dates
Purchase agreements for pre-construction condos outline two essential dates: firm occupancy and outside occupancy. These dates not only inform when you’re able to move in or take control over your unit but also what forms of compensation will apply to you should major delays occur.
Tentative Occupancy Date
Also called the Interim Occupancy Date, this is the date the developer formally intends to have a buyer’s unit ready for occupancy.
Outside Occupancy Date
The Outside Occupancy Date is a date beyond Firm Occupancy that marks the absolute latest possible date of occupancy.
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Know Your Rights
Builders can push back the tentative occupancy date twice without penalty, provided they follow the various legal requirements outlined by the provincial government and Tarion. This includes a notice period of 90 days. After two delays or within 30 days of the roof on the property being completed, a final date – known as firm tenancy must be set.
Should this firm occupancy date be passed, buyers will be entitled to formal compensation. When this occurs, buyers are presented with a fixed return of $150 a day, to a maximum of $7,500. Depending on the circumstances, buyers may also qualify for a separate reimbursement of up to $1500 should the developer fail to provide proper notice regarding delays.
In the case of longer, more significant impediments, buyers will be given the opportunity to cancel their purchase should they wish to do so. This right is known as the Purchaser’s Termination Period, and it grants the buyer permission to receive a full refund of all expenses paid on their condo so far, plus the fixed compensation amounts outlined above (when relevant).
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Best Practices For Buyer Protection
Pre-construction delays may be common, however, that doesn’t mean that buyers can not take steps to protect themselves and their investment as they await occupancy.
To remain as knowledgeable as possible, carefully review your purchase agreement and any other related documentation – this includes the Tarion Delayed Occupancy Warranty which outlines key details related to schedule changes and compensation. If you have concerns or questions, speak with your real estate agent, lawyer, or the developer themselves. To that end, it’s advisable to maintain regular communication with your builder. Ask for updates on the construction progress and be proactive in understanding the timeline.
Seeking an exceptional real estate experience? Our strategic advisory services can help you achieve a smooth condo purchase. Call us at 416-722-4723 or reach us by email at evan@christensengroup.ca.
