February 24, 2024

Jocuri

Mad about real estate

Toronto Real Estate: Pre-Construction Purchase Process (PPP)

The pre-construction purchase process or PPP is structured a lot differently than purchasing a property that is already in existence.  With pre-construction real estate you are essentially purchasing off a floor plan. This can prove to be a complicated task as you cannot essentially experience the product. Even though many condo sales offices in Toronto have managed to create model suites to reflect what certain units look like, you still don’t get the true effect as you would purchasing an already existing unit.

Once you have chosen the pre-construction project you would like to purchase in as well as your floor plan, it is time to sign your life away! The agreement used for pre-construction condos is much different that your standard resale agreement. Don’t be scared when you see the agreement as it is significantly longer than a resale agreement. Some can run up to 30 pages long. What is unique to the pre-construction purchase process is that the builder gives you a 10 day “cooling off” period. It is in this time frame that you will have your lawyer review your agreements on your behalf. Once this 10 day period is over and your lawyer has given you the ok, you must submit the remainder of your post dated deposit checks to the builder. This normally accounts for approximately 20{ef6a2958fe8e96bc49a2b3c1c7204a1bbdb5dac70ce68e07dc54113a68252ca4} of your total purchase price.

A few years later…….

By this time the building has started construction and you will get called in for color selection. It is at this time that you will start choosing the colors of your finishes and features of your condo. Most developers also give purchasers the opportunity to pay for upgraded materials at that time if that is something they would like to do. Approximately a year (or so) after the color selection process, you will be given the keys to your brand new suite. In real estate terms this is called interim occupancy. Even though you don’t have title to your unit, you are living in it and paying what we call “occupancy fees” to the builder. This number reflects a portion of your taxes, maintenance fees and interest on the remaining of the balance owed.  You are allowed to rent out your unit during the occupancy period, but be aware that you will not be eligible for your GST rebate if you choose to do this. Occupancy can last up to one and a half years. Once the condo building registers with the City of Toronto your lawyer will make the arrangements to exchange title to your new condo for the outstanding payment as agreed in your agreement of purchase and sale.

Unlike purchasing a condo that is already in existence, the pre-construction purchase process is a long one. The majority of the time you are purchasing some 2-5 years in advance. Even though it is a long waiting period, the benefits can be very rewarding financially when you purchase in the right location, with the right builder and at the right time.