Reading The Condo-Contract

“This looks NOTHING like what I thought I was getting!  The model suite was beautiful!”

Let’s have a look at common questions and frustrations, and the contract clauses that make the objections moot…

Contract

My readers know me well enough by now, and my industry colleagues have heard my schtick often enough, that I don’t need to regurgitate my feelings toward pre-construction condominiums, developers, the construction industry, TARION, The Condominum Act, et al.

Instead, I’d like to launch right into common objections and complaints, and show you the exact verbiage in the contract that lets developers get away with things they seemingly should not.

Objection:

“I bought this condo in April of 2011, and they said it would be done in December of 2012.  It’s now June of 2013, and it doesn’t look like it will be finished until 2015 or later!”

Verbiage:

(three key terms here: “Economic Viability Date,” “Tentative Closing Date,” and “Closing Date”)

“Notwithstanding the provisions of paragraph 16 hereof, the completion of the transaction contemplated by this Agreement is conditional upon the Vendor being satisfied on or before December 31st, 2012 (“Viability Date”), in its sole and absolute discretion………..The Vendor may unilaterally extend this condition for not more than three (3) periods of up to three (3) months each.

“The Vendor shall have the unilateral right to extend the Tentative Closing Date for one or more periods of time not exceeding twenty-four (24) months in total to any particular New Tentative Closing Date.”

(note: most buyers are completely unaware that their agreement is actually conditional for a long period of time – often years, as stated in the first section above)

(note: by massaging first the conditional period, then the extension of Viability Date, then the extension of Tentative Closing Date, then the extension of Closing Date, the developer can take a decade to finish the project if they want to)

Objections:

“There’s a giant pillar in my living room!  This wasn’t on the original floor plan!  This ruined my layout, and now I can’t put a dining room table here!  I NEVER would have bought this condo if I knew there was going to be a goddam pillar in the dining room!”

“What the hell happened to my floor-to-ceiling windows?  It was in my contract!  It said I had floor-to-ceiling windows!  Now the windows start at my waist and go slightly above my head!  They’re like 4-feet tall!

Verbiage:

“The Purchaser acknowledges and agrees that the Vendor may, from time to time, in its sole discretion, change, vary, or modify the number, size, and location of any windows, column(s), and or bulkhead(s) within or adjacent to (or comprising part of) the Unit, from the number, size, and/or location of same as displayed or illustrated in any brochure(s), model(s), or floor plan(s) previously delivered or shown to the Purchaser, including the insertion or placement of any window(s), column(s), and/or bulkhead(s) in one or more locations within the Unit which have not been shown or illustrated in any sales brochure(s), model(s), or floor plan(s) previously delivered or shown to the Purchaser (regardless of the extent or impact thereof), as well as the removal of any window(s), column(s), or bulkhead(s)….”

Objection:

“I bought the Penthouse unit, didn’t I?  I was buying the 38th floor unit – at the very top of the building!  The building was supposed to be 38-storeys!  What the hell is this?  Now the building is 43 floors, and suddenly I’m 6th highest floor?”

Verbiage:

“The Purchaser acknowledges and agrees that the Vendor may, from time to time, in its sole discretion, change, vary, or modify the plans and specifications pertaining to the Unit or Condominium, or any portion thereof (including architectural, structural, engineering, landscaping, mechanical, site servicing and/or other plans and specifications) from the plans and specifications existing at the inception of the project, or existing at the time the Purchaser entered into this Agreement, including without limitation, making any change to the total number of dwelling, parking, or other units intended to be created within the Condominium, and/or any changes to the total number of levels or floors within the Condominium, as well as any changes or alterations to the design, style, size, and/or configuration of any dwelling or other ancillary unit within the Condominium.”

(note: A Toronto Raptors season-ticket holder sued the MLSE for the same thing.  He was seated in the front row; “Row 1,” but then suddenly there were “Rows A, B, C” in front of him.  He was still the owner of seats in “Row 1,” but he was no longer in the front row).

Objection:

“What the F*#(!  What is this $28,720 in ‘levies’ I’m being charged?  My unit was $420,000, plus $38,000 for parking – that’s $458,000.  That’s what my contract says!  Now the developer wants $28,720 in closing costs?”

Verbiage:

“The Purchaser shall, in addition to the Purchase Price, pay the following amounts to the vendor on the Unit Transfer Date:

(I’m removing some of the excess, in the interest of time, including (i) so that’s not a mistake…)

(ii) Any new taxes imposed on the Unit by the federal, provincial, or municipal government

(iii) The amount of any increase in development charge(s), and/or education development charge(s)…

(iv) The amount of any community service art or facilities levy or charge…

(v) The cost of the Tarion Warranty Corporation enrolment fee for the Unit…

(vi) The cost of water meter installations, water and sewer service connection charges, hydro and gas meter or sub-meter installation…

(vii) The charge imposed upon the Vendor or its solicitors by the Law Society of Upper Canada…

(viii) The sum of $200.00 payable to the Corporation for deposit to the Reserve Fund.

(ix) $250.00 toward the cost of obtaining (partial) discharges of mortgages not intended to be assumed by the Purchaser

(note: I have often wondered why these charges ‘should’ be the responsibility of the buyer, even though the developer is the one DEVELOPING the building, but the most common answer is, “Because that’s the way it’s always been.  I find it interesting that the buyer often pays the developer’s legal fees.  Try Googling “Closing Cost Nightmare” and see how some people have been charged $100K for levies and other closing costs)

Objection:

“Why am I being billed $2,720 by somebody called ‘Kareg Leasing?’  I thought my maintenance fees were $390.20 per month, plus hydro, and now my lawyer says that the HVAC system is leased, so I have to pay $128.50 per month, AND, I owe them all this money for installation and the lease for the HVAC during the occupancy period?  That’s what that $2,720 is for?  And my hot water tank too?  So my maintenance fees are $390.20, but I’m over $600 per month!!”

Verbiage:

“Commencing as of the Closing Date, the Purchaser shall be responsible and obligated to pay the following costs and/or charges in respect to the unit.  The Purchase Price shall be adjusted to reflect the following items, which shall be apportioned and allowed to the Unit Transfer Date, with that day itself apportioned to the Purchaser:

(h) The Purchaser acknowledges and agrees that the HVAC equipment within the Unit may be leased and the Purchaser agrees on or before the Closing Date to enter into a conditional sales agreement with such compnay selected by the Vendor for the lease of same.

(i) The Purchaser acknowledges and agrees that the Instant (Tankless) Hot Water equipment within the Unit may be leased and the Purchaser agrees on or before the Closing Date to enter into a conditional sales agreement with such company selected by the Vendor for the lease of same.

(note – there is no cost specified, so you’re at the mercy of the “leasing company,” who I have learned, may be related to the developer of the project)

Objection:

“Fine, maybe I’m a naive, first-time buyer, but this condo looks NOTHING like what they showed me in the model suite, and in the brochures!”

Verbiage:

“The Purchaser acknowledges that only the items set out in Schedule “B” are included in the Purchase Price, and that model suite/vingette furnishings and appliances, decor, upgrades, artist’s renderings, scale model(s), improvements, mirrors, drapes, tracks and wall coverings are for display purposes only.”

Objection:

“They’re forcing me to take occupancy of my unit!  The building is a construction warzone, but they’re saying if I don’t take occupancy, they’ll slap ME with breach of contract!”

“I’ve been in the building for ONE YEAR – six months of occupancy, and six months of actual ownership, and the party room and gym aren’t finished yet!”

Verbiage:

“The Unit shall be deemed to be substantially completed when the interior work has been finished to permit occupancy.  The Purchaser acknowledges that failure to complete the common elements on or before the Closing Date shall not be deemed to be failure to complete the Unit.”

Objection:

“I swear to God – it’s like they put the absolute minimum amount of work necessary into this unit to be able to allow occupancy!”

Verbiage:

“The Unit shall be deemed to be substantially completed when the interior work has been finished to the minimum standards allowed by the Municipality so that the Unit may be lawfully occupied, notwithstanding that there remains other work within the Unit and/or the common elements to be completed.”

14 Comments

Post A Comment

Your email address will not be published. Required fields are marked *

  1. robertede says:

    Excellent article. Should be forwarded to every condo buyer out there to avoid certain misery.

  2. Joe the mortgage broker says:

    Excellent article. Should be forwarded to every condo buyer out there to avoid certain misery.

  3. LJ says:

    Wow. I will be sure to pass this on to anyone considering buying pre-construction. I can’t even imagine making as huge of a purchase as buying a home or condo and not actually knowing what the costs will be.

  4. AsianSensation says:

    David, are you still fuming from your westside fiasco???
    I feel like this is a re-hash.

    1. @ AsianSensation

      No, WSL is a distant memory. But it’s a good representation of what goes on in the condo industry.

      Today’s post was a long time coming. People are always sharing horror stories, and always asking, “How do they get away with it?”

      Well, this proves how…

      1. AsianSensation says:

        I hear ya DF.
        The sad thing is that most of those that read your blog are already familiar with these clauses, addendums and legalese terms.
        You gotta get this material into the Globe or some other mass media.

        I was burned before for buying pre-con and was fortunate enough to get my deposit back without much pain and suffering. Never again.

        Suck it Urbancorp!!!

  5. GinaTO says:

    Being more knowledgeable about real estate now, I would never buy pre-con again. That said, I guess I had beginner’s luck when I bought on plans in 2005 (at 15 Stafford). The move-in date was pushed back only six months (which was fine by me), the occupancy period lasted only four months, and Plazacorp delivered exactly what was promised, so no problems at all, and I spent five happy years in that condo. I really feel sorry for the people who were not as lucky as me.

  6. B Chang says:

    I once bought a stacked townhouse unit that was in the last quarter of the remaining subdivision, there less chance of variability when other units are already complete, there was one surprise that because the backyard was slowing steeply onto a birch lined park, the main floor walkout deck from the kitchen did not have stairs. The windows at the back was almost large enough for a walkout and the view was amazing, and its pretty much impossible to get stairs on such a sharp slope, and builder could have done a basement walkout, but did not include it. Not complaining as the view more than makes up for it and stairs would have blocked out the view.

    1. Sami says:

      There is a critical shortage of initomarfve articles like this.

  7. Bojangles says:

    Sharted on a condo.

  8. B Chang says:

    Buying a new house is better as long as your house closing date is not among the earliest in the subdivision. At most, you have no grass front and back for a year and some construction noise and trucks, but within the home, you can almost pretend its all good.

    1. Joe Q. says:

      … until your hardwood floors start to warp, and upon investigation, you realize that the builder nailed Tim Horton’s coffee cup lids into the space between the hardwood and the sub-floor. (Happened to a friend of mine)

  9. Paully says:

    …and that is why you should buy RESALE!

    1. Geoff says:

      Agreed. I’d never buy from plans, ever. I realize once upon a time this reluctance probably cost me money, but at least I knew what I was getting and when. I’ll find other ways to make money if it lets me keep what’s left of my hair.

TWEETS