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Pre-Construction Contracts: Why It Is Essential for a Lawyer to Review

By Kormans LLP

As a lawyer there is nothing worse than having to explain to clients that are so happy and excited to have bought a pre-construction property that there are significant costs that they will incur that they might not have anticipated or be able to afford as a result of their failure to have their Pre-Construction Contract reviewed by us prior to the expiry of any conditional period or “cooling off” period, if applicable.

 

Pre-Construction Contracts by their nature are significantly different from an Agreement of Purchase and Sale for a resale property. In addition to unanticipated costs there are a number of other issues that could lead to disappointment, confusion and frustration if not addressed in a timely fashion. The following are some of the issues that have to be considered with Pre-Construction Contracts:

1. HST – is it included in the Purchase Price or in addition to the Purchase Price

2. Deposits – are they insured

3. Occupancy Fees in a condo – how are they calculated

4. Lockers and Parking Spaces in a condo

5. Common Expenses in a condo

6. Termination Rights, Extension Rights, and Delayed Closing Compensation

7. Adjustments in favour of the Builder in addition to the Purchase Price

8. GST/HST New Housing Rebate

9. GST/HST Rental Rebate

10. Prohibition and/or conditions affecting rights to assign, lease, sell, market, advertise

11. Rights in the event of damage and/or incompletion

12. Warning clauses

 

To avoid disappointment, confusion and frustration it is essential to have a lawyer properly review a Pre-Construction Contract either (i) within a condition period for lawyer review; (ii) within the statutory 10 day “cooling off” period if the property is a condominium; or (iii) before the Pre-Construction Contract is signed.

 

 

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David H. Korman is a Partner at Kormans LLP. His practice areas include residential and commercial real estate transactions, commercial leasing and private and institutional lending. You can reach David at dkorman@kormans.ca.

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