After meticulously researching the real estate market, clearly outlining your homeownership goals, and looking into the condo developer’s track record, you’ve finally decided to take the plunge into the buyer’s pool and purchase a pre-construction residence.
However, upon signing the agreement of purchase and sale and handing over your deposit, your lawyer points out your contract is missing the all-important capped-levies clause. Or, after completing the paperwork, the buyer’s remorse quickly begins to sink in and you realize the pre-construction purchase wasn’t the right decision after all.
Does that mean you’re stuck and contractually obliged to follow through with a pre-construction deal you believe is a mistake?
If you are caught in such a situation, there may be no need to panic. Even if you signed a contract and paid forward a portion of your deposit, you may still be able to withdraw from a deal and get your money back.
10-day cooling-off period
According to Section 73 of the Condominium Act, people in Ontario who buy a pre-construction residence directly from a home builder are granted a cooling-off period, during which they can rescind their sales agreement for any reason and essentially walk away from a deal scot-free.
The only caveat is that the cooling-off period is viable for a short window of time. Specifically, just 10 days. After those 10 days, the cooling-off period no longer applies and the decision to walk away from a sale can become a legal and financial pain.
What you need to know about the cooling-off period:
- The ability to rescind a sales contract, free of penalty, is only granted to buyers during the first 10 days of entering into an agreement of purchase. Therefore, time is of the essence.
- These 10 days do include weekends and not just business days.
- The cooling-off period only applies to contracts where a pre-construction condo is bought from a builder. The cooling-off period doesn’t apply to any other type of home purchase, including assignment sales or homes closed upon over the Multiple Listings Service.
Given the fact the cooling-off period only extends to 10 days, buyers must capitalize on this short window of time. Here’s a quick checklist pre-construction buyers should address:
- Ensure a real estate lawyer closely analyzes the agreement of purchase and sale to identify if the contract includes unfavourable terms. For example, ensuring development levies are capped and hashing out other details around whether you’re allowed to rent out the unit during the occupancy period should be addressed during the cooling-off period.
- Connect with a mortgage broker, or bank, to ensure you’re pre-approved and all your financing is in place.
- If you choose to leverage the cooling-off period, you must make the announcement formally, in writing. It’s highly recommend a lawyer is used during this step.
The cooling-off period is automatically granted to all pre-construction condo purchases from a builder in Ontario. In situations where you’re buying a freehold residence, it’s worth taking extra measures and checking with your lawyer to find out if this 10-day window still applies.
Unlike in Ontario where the cooling-off period for pre-construction (or pre-sale) condos is 10 days, the rescission period on condos is seven days in British Columbia.