Four things to look for in your new home contract

The length of a pre-construction contract will leave you reminiscing about the complications in Lord of the Rings. Schedules, addendums and page-long paragraphs can leave any reader feeling overwhelmed. Here’s a guide to four important things to watch out for and make sure you understand.

1. Is it assignable?

Your closing date will likely be years away, so consider that circumstances change, unforeseen events occur, and your position in life might change so much that as closing approaches, you may not wish – nor be able – to close.

An assignable contract will help you sleep better at night, because if life throws you a curveball, you can hit it right back by assigning your contract to a new buyer who can step into your shoes. If the market is anything like the last few years, you might even end up with some profit from the assignment.

If your contract is not assignable, you may have no choice but to close – and that will mean closing costs, builder’s adjustments, occupancy fees and mortgage approvals, and more cash down.

Review the assignment clause in your agreement. Not all assignment clauses are the same; some may require builder consent and approval, some may require that a significant fee is paid, and some may have other restrictions attached.

2. Early termination conditions

We’ve all heard the stories about projects being cancelled, and buyers facing the choice of having to pay more for their new home, or have their deposits returned. Builders cannot cancel your contract for any reason, but they may do so if they cannot meet certain listed conditions in your contract, such as meeting a sales threshold or obtaining their own financing for construction.

Being informed may not prevent your contract from being cancelled, but you will be aware of important deadlines and the reasons for which your builder can cancel the project. Most of this information is contained in the Tarion Addendum that is attached to your agreement. It is important that you read this and understand all your rights.

3. Delayed closing timeline

Your closing is scheduled for, let’s say, 2025. It’s worth it, you tell yourself as you think about the next few years. COVID slowed everything. What if your closing is delayed to 2026, 2028 or 2030? Highrise projects can be delayed a long time. Construction can be complicated, and your contract may allow your builder to delay the closing for several years to deal with those complexities.

In lowrise construction, there may be material shortages or other legitimate reasons for delay. Again, refer to your Tarion Addendum to understand your rights as well as the builder’s.

4. Cooling off periods

New home purchase contracts are exceptionally long and complicated. Condominium contracts come complete with a Disclosure Statement that can be extremely complex. You want to ensure that you are protected and informed, so taking it to an experienced lawyer for their review should be your next step. Reread articles, such as the ones on our website, speak to others who have purchased both types of products, and listen to focus on the things that are important.

Condominiums have a 10-day cooling off period that provides you a right in law to rescind the contract, if your expectations are not met. Freehold purchases, on the other hand, are firm when you sign and you must close – unless you insert a conditional clause.

The best advice we can give you is to invest in a review with a knowledgeable professional to advise you. It may be the best investment you ever made. Remember, you are spending a large amount of money. Do not scrimp in ensuring it is the right investment.