Considering stepping into the world of real estate? Or perhaps you’ve just been wondering about the nitty-gritty details of pre-construction? You’ve come to the perfect spot. In this blog, I’ll walk you through the common but important terms that you’ll come across when checking out pre-construction projects in GTA. It is important you have the right knowledge as it’ll help you differentiate reliable builders from unreliable ones, and understand the terms and conditions. Let’s get started!
Pre-construction refers to the phase before actual construction begins on a property. This period involves from the initial planning, blueprint designs, and environmental assessments, to obtaining necessary permits from authorities. Builders also use this time to actively market, showcase, and sell units to prospective buyers. For buyers, it’s an opportunity to purchase a property, often at a lower price, before it’s built. Some projects also let you have a say in customization and benefit from appreciating property values.
2. Condominium (Condo)
A condo is a type of real estate where an individual owns a unit within a larger building or community. Common areas, like hallways, gyms, and rooftop terraces, are shared amongst all unit owners. In Canada, condos are especially popular in densely populated cities like Toronto, Mississauga, and Vancouver.
3. Deposit Structure
This outlines how and when buyers will make payments for their pre-construction unit. Often in GTA or Brampton, deposits are made in installments. For example, you might put down 5% upon signing, another 5% in six months, and so on. You don’t need to get a mortgage pre-approval to book a unit. You can continue paying the deposit structure with any funds you have until it is time for occupancy. Post that, you can get a mortgage to pay the remaining amount.
4. Tarion Warranty
Tarion is a non-profit entity in Ontario dedicated to overseeing new home builders and safeguarding the interests of new home buyers. Its primary function is to ensure that builders adhere to provincial construction standards. For home buyers, Tarion provides a warranty that covers a variety of potential problems in newly built homes and condos, most notably issues related to structural integrity. In essence, when you purchase a new home in Ontario, Tarion ensures you have a protective layer against major construction defects.
5. Assignment Sale
An assignment sale happens when a buyer sells their rights to a property before the property is completed. They’re selling their “spot” in line to someone else. It’s a way to transfer the obligation to purchase a property from one buyer to another.
6. Closing Costs
These are the additional fees you pay at the end of a property purchase transaction. They can include land transfer taxes, legal fees, and adjustment costs. In pre-construction, there may be additional fees, like development charges. Most builders mention the development charge caps when you pay your first deposit, so you can make a choice if it’s a high price or you’re comfortable paying the amount.
7. Occupancy Date
This is the date when the buyer can move into their unit. However, note that this doesn’t mean the building is entirely finished. It just means your particular unit is habitable. Often, there will still be construction going on in other parts of the building or community.
8. Cooling-Off Period
The cooling-off period is a 10-day period during which buyers have the flexibility to re-evaluate their decision and, if needed, withdraw from the purchase without incurring penalties. This provision ensures that buyers don’t make hasty or pressured decisions. It also grants them time to consult with legal or financial experts and thoroughly review the agreement’s terms.
9. Plan Review
This is a meeting between the buyer and the builder or developer. It’s an opportunity for buyers to view the plans for their unit, ask questions, and clarify any uncertainties. It ensures both parties are on the same page before construction commences.
10. Reserve Fund
For condos, the reserve fund is a pool of money set aside for major repairs and replacements in the future. Think of it as a safety net for the condo community. It ensures there’s money available for unexpected repairs or maintenance without suddenly burdening unit owners with massive fees.