Unlike resale homes where a standardized offer is used, most builders use their own form of agreement of purchase and sale. These agreements are often one-sided in favour of the builders and the builders are usually not prepared to make any wholesale changes. That said, it is important that you make the agreement conditional on your lawyer’s review so he can advise you of pitfalls before the agreement is binding. I have reviewed a few clauses in the new home agreement that should be understood.
Talk to us before and after being presented with a sales contract. We’ll tell you what you what to expect and how to handle the negotiation.
- Extended closings Most new homes are not completed by the closing date set out on the agreement. Under the terms of the Ontario New Home Warranty Act the builder is permitted to extend the closing date. There are rules on how this extension is announced and you have some right to refuse the extension after 120 days. If you think an extension is likely, give us a call and we’ll fill you in on your options.
- Substitution of Materials The builder has the right to make minor changes to the plans and to substitute materials provided any substitutions are of equal value.What’s minor and what’s major? We can help.
- Builder adjustments. In addition to the price, the agreement of purchase and sale will usually provide that the purchaser has to pay an additional sum to the builder to cover adjustments. These builder adjustments usually include payment for and installation of the hydro and water meter, paving the driveway, esthetic enhancements such as the tree, Tarion (New Home Warranty) enrollment fee, Law Society Transaction Levy and Development Charge increases. These adjustments can add between $2,000.00 to around $10,000.00 to the cost of the home.
We have represented countless purchasers and can work with your builder to either reduce or cap your financial exposure. It’s important that you talk to us immediately as arrangements must be finalized early in the contract process.
- Substantial completion Most builder agreements of purchase and sale provide that the deal must close when the house is substantially completed. Substantially completed usually requires that the house to be finished to the stage when the municipality will allow the purchaser to live in the house. Since the municipality is not concerned with the quality of the work, there can take short-cuts such as installing a temporary sink without cabinets. Some builders are more inclined than others in this regard. We are familiar with many of the builders operating in Oakville and the surrounding area and can help you keep things on the level.
- HST The Province of Ontario has announced that the provincial sales tax will be harmonized with the GST effective July 1, 2010. This new harmonized sales tax or HST will directly impact the real estate industry. Services such as real estate commissions and legal fees will, as of July 1, 2010, be subject to the 8% provincial portion of the tax. New homes closing after July 1, 2010 will be subject to the new tax. It is anticipated that there will be a rebate similar to the treatment of GST on new homes. The directives from the provincial government indicate that a rebate of 75% of the tax will be available to Purchasers of new homes under $400,000.00 and unlike the GST rebate, Purchasers of homes over $400,000.00 will be entitled to the rebate on $400,000 or a total of $24,000.00. As with the GST rebate only individuals purchasing for their own use or the use of members of the Purchaser’s immediate family will be entitled to the rebate.
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