Buying a pre-construction condo can be an attractive option for many buyers, offering the opportunity to customize their future property while enjoying a potentially lower price. However, it’s essential to understand the key elements that come into play when purchasing a condo off-plan. In this article, we’ll answer four important questions about buying a condo off-plan: how many units the developer must sell in order to obtain financing, what is included in the preliminary contract and what the buyer’s obligations are when signing it, determining the down payment to be paid at the signing of the preliminary contract and how payments are staggered thereafter, and protecting the monies turned over to the developer and who is responsible for them.


1- How many units must the developer sell to obtain financing?

Typically, financial institutions require that at least 50% of the units in a condominium project be sold before providing a construction loan. However, this minimum threshold is subject to increase based on the risk factors assessed by the lending institution.

Despite their enthusiasm and good intentions, some developers may not be able to meet this threshold and may be forced to abandon their construction project. This could be due to a lack of demand for this type of property or a slowdown in the resale market, which can affect the new condo market. Most buyers need to sell their current home before committing to a new purchase.

If the developer is unable to complete the project, they must refund the down payment made by the buyer. As a result, buying a pre-construction condo comes with a certain level of risk, as many things can happen during the construction period. Typically, there is a 12 to 24 month delay between signing the contract and taking possession of the unit.

2- What are the elements included in the preliminary contract and what are the obligations of the buyer when he signs it?

The Civil Code of Canada requires a preliminary contract to be signed by the developer and the purchaser, although there is no standard mandatory form. Some developers may use the form provided by their warranty plan, while others may create their own contract.

The preliminary contract typically includes information such as a description of the unit being purchased, its location in the building, the selling price, and the delivery date. It is a legal agreement between the developer who agrees to deliver what is written in the contract and the consumer who agrees to purchase it.

For buildings of 10 units or more, the developer must also provide an information memorandum that includes the names of the architect, engineer, builder, and developer, an overall plan of the real estate project, a technical specification, a projected budget, a description of the common areas, and a summary of the regulations that will govern the building or buildings. The declaration of ownership will also contain information such as the main characteristics of the project, the number of units, and the type of regulations that will be applied.

3- How will the down payment be determined at the signing of the preliminary contract and how will payments be staggered thereafter?

Developers use different methods to determine the down payment required for purchasing an off-plan condo. Some require a fixed amount, while others require a percentage of the sale price. Moreover, many developers require additional payments to be made gradually over the construction period. Payment terms should be clearly stated in the preliminary contract.

This indicates that both the client and the developer are committed to the project, and buyers should be cautious of very small down payments. Buyers who do not make a financial commitment and then withdraw during the project can jeopardize the project and cause significant problems for the developer, which can also affect buyers eagerly waiting for their unit. Although the developer has the right to sue, it is unlikely to do so if the amounts involved are small, given the costs and delays involved.

4- How is the payment to the sponsor protected and who is responsible for this protection?

If a building has four or fewer stacked units, the Residential Construction Guarantee (RCG) plan is mandatory and provides down payment protection up to $50,000. However, for high-rise buildings, the developer is not required to have a warranty plan. Therefore, it is important to verify the extent of the financial protection offered by the administrators of the guarantee plan to which the developer adheres. Additionally, it is possible to remit the amounts paid to a notary who will hold them in trust, offering another solution for financial protection. This option is recommended as it allows consumers to protect themselves against any unforeseen events that may arise during construction and affect the financial health of the company. In short, the warranty plan and trust are the only ways to protect down payments made when buying off-plan. If you are considering buying off-plan, it is important to take these precautions to avoid any financial risk.

In conclusion, buying a pre-construction condo can be an attractive option for buyers who want to customize their future home while potentially enjoying a lower price. However, it is important to understand the key elements that come into play when buying a condo off-plan to minimize the potential risks associated with this approach.

If you are considering purchasing an off-plan condo, you may be interested in SUMUM, Phase 6 of VIVA Condos. By buying off-plan, you will have the opportunity to personalize your living space by selecting finishes and features that best suit your needs and lifestyle. Our housing project will also offer you the chance to live in Laval’s new downtown area, located just steps away from Centropolis. You will have access to a wide variety of entertainment, sports facilities, shops, restaurants, terraces, and more. To be in the center of the action, reserve your unit now at SUMUM, Phase 6 of VIVA Condos.Contact us.

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