Buying a new home is a big decision. A buyer needs to take special care of a few important matters while buying a new home. The buyer should familiarize herself with the developer/builder such as its experience and customer service reputation.Once the decision to proceed with buying the house is made, in addition to ensuring their finances are in place, the buyer should contact their lawyer about reviewing the purchase agreement.
The purchase agreement between the developer/builder and the buyer is complex, complicated, and lengthy. A lawyer will be able to guide the buyer better to understand the complexities of the purchase agreement. However, it is important that the buyer reads the entire document completely and flag points that she should discuss with the lawyer. The lawyer can offer practical advice, and a buyer would benefit more from the lawyer’s inputs by asking the right questions.
Some of the key elements where the lawyer’s inputs may become necessary when buying a new home are:
Closing costs: An important factor buying a new home is the additional costs involved with the closing of the deal. Unlike in the purchase of a resale home, in a new home purchase, the closing costs can spiral because adjustments can be added to the price of the house. In the past, the developers/builders would include the closing costs in different parts of the purchase agreement, making it difficult for the buyer to estimate accurately the total closing costs. However, now, TARION (Ontario New Home Warranty Program) compels the developer/builder to include all closing costs in one place so that the buyer can access the information more readily.
Closing costs may include, a law society transaction levy, development charges, utility set up fees, security deposits, etc. Closing costs are variable, and are, in some cases, negotiable. The lawyer can assist in identifying the closing costs. For a new home that is going as the buyer’s primary place of residence (as opposed to investment purposes), the HST is included in the cost of the property.
Schedule of Features: This is the list of amenities and features the developer/builder will include in the new house. The general rule about amenities is if it isn’t included in the purchase agreement, the developer/builder is not obligated to provide it. The buyer should always bear in mind that that there is likely to be some variation between the advertised features and the reality such as adjustment of material, as many items are upgrades which need to be purchased at additional cost.
Variations: The developer/builder may make minor variations to the plan, and there may some modifications to the actual construction that don’t match the artist’s conception. The builder/developer may also substitute material, but will, in most cases, consult the buyer before finalizing the material.
Municipal services: Generally speaking, neither the builder/developer nor the buyer have any control over the physical placement of the municipal services such a fire hydrant, or a light pole, or a phone connection junction box, etc.
Delays: In a new home purchase, delay in the completion of the construction work is commonplace. The purchase agreement will include an ‘outside closing date’ which is the date by which, the buyer may withdraw from the agreement, if the house is not ready for occupancy.
Angelo DeMichele is a Partner at Simmons da Silva LLP