A condo is cancelled, “relaunched” and resold at higher prices, delayed by five years, or remains in the dreaded occupancy period for an absurd 25 months.
A unit is smaller than what the buyer paid for, there’s no terrace as promised, there are two giant pillars in the living room that weren’t on the original floor plan, and on, and on, and on.
Let’s take a look at a few random builder forms and identify where, and how, developers ensure a dissatisfied buyer has absolutely nothing to complain about.
Then ask rhetorically, to buyers, “Why in the world would you sign this?”
Those documents you see me holding in the video are three random “builder forms” from notable pre-construction condominiums.
The clauses that appear are all just variations of one-another, having been drafted by brilliant legal minds, with hundreds of years of combined experience, who specialize in protecting the interests of condominium developers in Ontario.
And yet, into the sales centre walk Jane and Jim; wide-eyed, and fancy-free, ready to buy their future “home.”
What in the world makes Jane and Jim think they can “beat” the developer?
And what in the world makes somebody believe that this isn’t, in fact, a game, that pits the developer against the buyer?
Ignoring appreciation or depreciation, it truly is a zero-sum game. A penny out of the buyers’ pockets, is a penny into the developers’.
After I wrote about the failed Museum FLTS two weeks ago, I received a couple of emails from frustrated buyers, who somehow made me into the bad guy for writing about the project to try and educate other buyers about the pitfalls of pre-construction condominium sales, and (gulp!) suggesting that buying pre-construction condo projects comes with risks they assume.
The blog post was lost on them.
The idea of accepting responsibility was too.
And last but not least, the idea of “wanting to know why the developer cancelled the project,” didn’t seem to come with an obvious, two-part answer:
1) Because he wants to.
2) Because he can.
Oh, and there’s a necessary third part to this:
3) Because buyers signed documents that allowed him to.
If you’re reading this, and you didn’t watch the video above, then stop reading – and click “Play.”
Those builder’s forms are ripe with clauses that allow the developer to win the “game,” every single time it’s played.
Nothing in that agreement is for the buyers’ benefits.
Everything in there is to protect, and promote the interests of, the developer.
So I ask again, “Why in the world would anybody sign that?”
If you watched the video to the end, and you saw the clause about the developers’ salespeople basically being able to say anything they want, with no repercussions, then why would anybody walk into a sales centre without an agent?
It’s like the lunatic serial killer that decides to act as his own lawyer in court.
Why in the world would anybody decide not to hire a lawyer to review the builders forms during the Provincially-mandated 10-day rescission period? I would estimate that half of all pre-construction condo buyers think the 10-day rescission period, aka “cooling off period,” represents an opportunity to change their minds, or decide whether to go through with the purchase. But it’s not! It’s ten days to have a lawyer look over the builder’s forms, that were written by an army of lawyers that are in the very business of writing iron-clad builder’s forms!
Why in the world would anybody sign those documents that I detailed in the video?
As I mentioned in my Museum FLTS blog post, there are people who make money in pre-construction.
But in order to do so, you have to eliminate, or mitigate enough of the risk to balance the scales.
A friend of mine bought into a pre-construction project four years ago (obviously not through me).
He’s no slouch. He’s well-educated, with a legal background, a business degree, and experience in real estate.
During the course of his 10-day rescission period, he had seven amendments drafted, submitted to the developer, and accepted, before he firmed up his deal. In the months that followed, he had five more amendments accepted, through a developer that was trying to get toward the 80%-sold mark in order to obtain financing for the high-end, boutique’ish condo, and who also valued customer service among a buyer-demographic that would “spread the word.”
My friend got everything he wanted, and more. And his purchase, and investment, made sense.
Had he not been able to tip the scales in his favour, he would have walked away.
But what about the Average Joe in Toronto?
What about the person who walks into the sales centre, and buys through the floor agent?
I believe that built into every developer’s financial model, is the idea that in order to get to 80%-sold mark, you’ve got to sell a certain amount of units to people who “get it.” These people will buy, but only among terms far more favourable that what is initially offers.
The rest of the buyers are the ones that pay the developers’ bills…