Purchasing a New Build

Builders’ offers contain a lot of things that you won’t see in a resale offer. You usually have much less room to negotiate these issues.

Here are some examples of terms and conditions that are in many new home purchase contracts:

  • The builder can make minor changes in the colour of brick, siding, flooring, shingles, interior finishes and so on.
  • There are extra costs such as for water meter installation, hydro connection, boulevard tree planting, development charges, local improvement charges, warranty enrollment, new development levies or increases in existing levies, grading deposits
  • a prohibition against making any changes in the grading until the entire subdivision is finished, including landscaping, fences, pools, decks, and so on.
  • restrictions against TV dish antennas, clotheslines and more.
  • restrictions against parking anything other than a private automobile in the driveway or anywhere other than in a wholly enclosed building

Sometimes, some of these can be reduced or negotiated out of the agreement. This is something you should speak to your lawyer about.

Nearly all builders will include the right to delay the closing date if the house will not be ready on time, without having to pay you any compensation, unless they do not give you enough notice. Most builders take advantage of this.

As with freehold properties, the Ontario government requires builders to provide a three stage warranty against various problems after closing, as follows:

  • a 12 month warranty against minor defects in workmanship and materials. You only have certain windows of opportunity to make a claim under this part of the warranty, so make sure you note these dates.
  • a two-year warranty against serious defects in electrical systems, heating, cooling and plumbing systems
  • a seven year warranty against major structural defects. The statute containing this requirement is the Ontario New Home Warranties Plan Act, which can be found here.

Under this legislation, you and the builder must meet at the house just before closing to thoroughly inspect the property and record any deficiencies.

It is typical for a builder to reserve the right to have its workers and subcontractors enter the property for the purpose of performing warranty work, and to inspect lot grading and effect corrective measures in the grading. Builders also usually register prohibitions against altering the grading prior to the full and final approval of lot grading in the subdivision by the municipality. There can also be requirements that you grant certain legal rights to the municipality after closing, for the purpose of installing catch basins and other infrastructure on the property. These are the sorts of details that your lawyer will be able to warn you against if your lawyer has a chance to review the agreement before you sign it.

If the new home is a condominium, frequently there is a two-part closing: Once the unit itself is ready for move in, you pay a part of the down payment, and then for the next several months, you pay a type of rent (called an “occupancy fee”) to the builder until the title is ready for transfer to you (the builder can’t transfer ownership until the condominium project is registered by the Ontario government, and that can be done only after all of the units are substantially complete). You pay the remainder of the purchase money on the final closing date, and that is when your mortgage is registered, along with your Transfer. The Land Transfer Tax is also paid at that time.

If you have managed to reach this point in this article, you will understand that what I have said is very general in nature, and that not every comment or point applies to every situation. Therefore, you should not rely on anything in this article without first consulting your own lawyer about how the particular issue or point applies to you.