Reason number one-million why I actively tell my clients to “buy resale:” the fact that you actually know when you’re closing!

We’ve all heard about delays that happen with most (read: all) new condominiums, but the Agreement cleverly disguises these “delays” in a section referred to as “closing.”

Let’s look at the exact wording in the Agreement…

This is a very long section, so I’m going to skip over some of the sub-sections that have no real bearing on our conversation.  It’s not that I’m trying to hide anything, but rather I’m trying to raise red flags.

Closing

18.  (a) “The Purchaser acknowledges and agrees that the Closing Date set out in subparagraph 3(b) of this Agreement is a Tentative Closing Date.  The Vendor agrees that it shall provide written notice to the Purchaser of the confirmed Closing Date being a date selected by the Vendor, at least 120 days before the date identified in the notice and confirmed no later than 30 days after the completion of the roof assembly, provided such selected date shall not be more than twenty-four months from the Tentative Closing Date.

This section merely introduces the framework for the closing date.

The completion of the roof assembly of a condominium is an important stepping stone, because this is when they first have to give notice that a Confirmed Closing Date has been chosen.  Of course, this date is meaningless, but we’ll get to that…

This is also the first time that we see those daunting words, “twenty-four-months.”  Yes, really, it’s in the Agreement!  The developer can delay the project by TWO YEARS just from these clauses alone!

(c) “The Vendor shall have the unilateral right to extend the Tentative Closing Date for one or more periods of time not exceeding twenty-four-months in total to any particular New Tentative Closing Date, upon giving the Purchaser not less than 90 days prior written notice thereof.

So now we’re just extending the tentative closing date by two years!  Beauty!

Two years.

A lot can happen in two years.  Your life can change.

You may have been told by the sales centre that your condo would be ready on July 7th, 2011, but it might be July of 2013.  It might be longer.

You might have planned to move in, but then met your wife, then had a kid, and then suddenly realized that you had this pre-construction condo waiting in the wings.  I have seen this happen time and time again.

But the worst part about this is the section “for one or more periods of time.”  Because that’s how they string you along!  You get a notice extending the Tentative Closing Date by one month, and you think it’s not that big a deal.   But then in a few weeks, you get a second notice whereby the extend the date by a further two months.  Then another notice for another four months, and so on, and so on…

(d) “If the Vendor shall be unable to complete this transaction by the Confirmed Closing Date for any reason, whatsoever, the Vendor may extend the Confirmed Closing Date once, not to exceed 120 days, provided written notice is given to the Purchaser at least 65 days before the Confirmed Closing Date.”

So that “Confirmed” date isn’t really confirmed, is it?

What’s the point of differentiating between a “Tentative” date and a “Confirmed” date if the confirmed date isn’t really confirmed?

Why not just call it “Closing 1” and “Closing 2?”

Or call it “Circle” and “Square?”

The words “tentative” and “confirmed” have no real meaning for purposes of the Agreement, as far as I’m concerned.  The tentative date is merely a placeholder until the developer has a CLUE when the building might be finished.  And we know that there is a TWO-YEAR grace period!

When that clue is handed down, the developer can set a “Confirmed” date, but it’s really not confirmed at all since the developer can move this date yet another four months.

Imagine if this is how things worked in the real world?

Take a wedding, for example.

You send out “Save The Date” cards for the event, but unlike the developer who gives you a meaningless tentative date, you specify, June 21st, 2010.

Then closer to the date, perhaps next year, you send out actual “Invitations” for the event, which confirms it as June 21st, 2010.

Can you then change the date with 65 days notice, and extend it as far as October 21st?  What about all the guests?  The church, reception hall, caterer, DJ, and florist?

The word “Confirmed” doesn’t actually mean anything, as far as the Agreement goes.

(f)  “The foregoing provisions of subparagraph 14 (a – e) hereof are intended to reflect the TARION policies, regulations, and/or guidelines on extensions of the Confirmed Closing Date…”

So here they’re just blaming it all on TARION, but why not?

TARION is the real reason that we find ourselves in this mess – and believe me – the condominium construction industry in Ontario is a MESS!

The Ontario New Home Warranty isn’t worth the paper it’s printed on, since builders are essentially free to pick-and-choose which items to complete on your Pre-Delivery Inspection (after you’ve already taken occupancy and signed the Occupancy Agreement), and any outstanding deficiencies are imbedded in the red-tape that TARION makes you sort through over the next couple years.

TARION is run by developers.  They are NOT here to protect consumers, no matter what they claim their mandate is.

Anyways…

The bottom line is that the section on “Closing” in the Agreement effectively gives the developer two full years to delay the project, and then another four months as a sort-of grace period.

And let’s not forget, that the developer can set any Tentative Closing Date that he wishes, and it need not be the same as what is advertised on promotional material!

Imagine a massive sign that says “Occupancy in Summer 2012” and then going in to the sales centre, having an Agreement drafted, and seeing “March 7th, 2013” as the Tentative Closing Date.  It can happen!

I can’t imagine why any rational person would purchase pre-construction and have no idea when they’ll take possession, when they can buy a resale property and close on  December 11th, 2010, with no questions asked.

We used to get serious price discounts on pre-construction because we weren’t buying a tangible product!  Nowadays, however, the prices for resale and pre-construction are even.

Give me ONE good reason why you should buy pre-construction instead of resale?

As a final thought, I urge the developers and their assistants to continue calling my broker and complaining about what I write on my blog, as they have been doing for the past four months.

It only justifies the tireless efforts I put into this blog and my mandate to expose them for the crooks that they are, and protect the consumers who buy the product they sell – something TARION is apparently supposed to do…