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When you buy
a new home, the contract, or the signed Agreement of Purchase and
Sale document, between you and your builder is your assurance that
you will receive exactly what you have purchased, at a mutually agreed
upon price.
What
Should The Contract Cover?
The contract will describe
the lot, the model, the selected upgrades and other obvious items
such as the price and financing terms. In addition, it should include
information on restrictions and obligations that may affect your
rights and responsibilities as a home owner. Ask your builder or
sales representative the following questions:
- Is there a right of
way or an easement registered against the lot? For instance, will
there be a fire hydrant on your lot, or an electrical box?
- Are there any subdivision
requirements that must be followed? The agreement between the
developer and the municipality may specify certain requirements
which you in turn must respect. For instance, the agreement may
stipulate a minimum of one tree per lot, or it may place restrictions
on the kinds of trees that you may plant.
- Other subdivision restrictions
may apply to parking commercial vehicles, trailers and boats or
performing general automotive maintenance in the driveway; installing
a satellite dish; or using an outdoor clothesline.
- Are there municipal
bylaws that will regulate activity in your new neighbourhood?
For instance, are there restrictions on nanny suites, home businesses
or storage buildings?
All of the above should be
covered in 'Schedules' which form part of the Agreement of Purchase
and Sale.
Making
The Offer
When you make an offer, you
are in effect agreeing to all of the terms and conditions as set out
in the document.
Before signing, have
a lawyer review the Agreement of Purchase and Sale. (Keep in mind
that an offer signed by you, and accepted and signed by the builder,
is a legally binding contract on both parties.) Alternatively, make
your offer conditional on your lawyer's favourable review. It is sometimes
wise, and less costly, to agree with the builder on price and terms
before involving a lawyer. (If you cannot reach an agreement with
the builder on these fundamental points, there is no need to pursue
the contract any further.)
This condition, like all other conditions, should be written into
the main body of the Agreement of Purchase and Sale, or attached as
a separate Schedule with a brief notation in the main text.
Before signing the offer,
make sure that you (and your lawyer) check the following points:
- Correct lot, model and
elevation (the orientation of the house on the lot).
- Correct spelling of
names.
- The listing of all Schedules
as part of the contract (site plan, floor plan, specifications,
restrictive covenants if applicable and warranties; also, all
conditions such as financing, sale of current home, lawyer approval).
- Price, including net
HST for owner occupants.
- Mortgage information
(principal, interest rate, term). If the offer is conditional
on financing, the Agreement should also specify the number of
days allotted for obtaining the mortgage, the process for notifying
the builder and what will happen if the mortgage application is
turned down (i.e., the buyer's deposit will be returned in full).
- Receipt of condominium
documents, including budget (if applicable; this does not pertain
to freehold dwellings where ownership includes exterior space).
- Deposit structure, linked
to construction stages or other 'milestones' (such as an additional
$10,000 upon a firm agreement).
- The closing date (the
date when the purchaser takes possession of the new home).
- The irrevocable date
when the builder must respond to your offer, failing which the
offer is no longer valid.
Take your time when reviewing
the contract. Make sure that all points are covered and that all Schedules
are attached and noted in the Agreement. Then you can sign the contract
and be confident that you have done your homework properly.
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