You have found your dream condo. You fell in love with the building plans and you signed a preliminary contract with the intent to buy a unit in this building. The agreement stipulates that you will take possession in six months, at the completion of the work. You have made all the necessary arrangements to leave your current residence in time to move into your new condo without having to pay two mortgages. Everything is lined up and the move-in date is getting closer. And now, surprise! You learn that the delay will not be six months, but ten. What are you going to do?
Delays in the occupancy date for new homes are, unfortunately, far too common. Many unpredictable situations can arise on a construction site: poor weather, excavation challenges, permit delays, problems with the delivery of materials…
Here are some tips to protect yourself – as much as you can – from delays in the delivery date of your real estate purchase.
1. Check out the reputation of the builder
The first step is to get to know who you are dealing with by verifying that the builder has a license from the Régie du bâtiment du Québec. You can find that information here, in the Licence holders' repertory.
Next, find out about some of the past projects of this company: do they have a good reputation ? Are the new home owners generally satisfied? On the other hand, is anybody taking them to court?
This will also give you a sense of their construction experience. Are they novices? Is this one of their first projects? The newer they are to the business, the higher the chances of delays. If you find nothing about previous projects in your research, this could also means that they use a different company name with every new project, which may not be a good sign either.
2. Ask the right questions
Before you sign the preliminary contract, be sure to ask the builder if construction has started. If the answer is no, ask if he has a construction permit and request that he give you proof. If the builder has not yet received his permit, the delay could be significant.
You will also want to ask what percentage of units have been sold or are in the process of being sold : often, builders do not pre-sell a sufficient number of units based on plans. The lack of funds generated from pre-sale could cause delays in the progress of the construction.
3. Make your arrangements ahead of time
Don’t wait to find out whether or not there will be a delay: plan for it when you discuss the preliminary contract with the builder. How does he plan to compensate buyers if there is a delay? Will he pay to move and store furniture? Will he reduce the sale price? Make sure that you come to an agreement in writing, never only verbally, that covers the unexpected.
Another option is to agree on a flexible occupancy date – between July and September for example – that will satisfy both of you. With this kind of arrangement you might be able to negotiate a better price.
4. Pay close attention to your preliminary contract
There is a clause in the preliminary contract that indicates the expected date of possession of the property, and stipulates that if the builder encounters a delay due to some kind of catastrophe – a war, a fire, etc. – he cannot be held responsible and is not required to offer compensation.
You’ll want to ensure, ideally with the help of a real estate professional (notary, broker or lawyer), that this clause cannot be used against you. Pay close attention to the circumstances which would allow the builder to complete the property late with no consequences, and negotiate the elimination of some of them, if possible.
Once again it is important to repeat: make sure you get it all in writing.
What does the law say?
In the case of a delay in occupancy, is the builder under any obligation to compensate you financially? If he is accredited with the New home guarantee program of the APCHQ, the answer is yes. The buyer could receive up to $5,000 in the case of a delay, on the condition that he can supply evidence.
To summarize, it is essential to pay attention to all the details when contracting a real estate transaction. A delay in the date of possession is only one of many potential pitfalls that an unsuspecting buyer could encounter. Even if the purchase of a new home is fraught with many strong emotions, it is important to keep your head, and surround yourself with professionals – notary, lawyer and real estate broker – who will be able to guide you through the maze of a successful transaction.