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Buying a New Home from a Builder

I frequently get asked by clients to outline the differences between a purchase of a resale home and a purchase of a new home from a Builder.

From a legal point of view, the most significant difference is the Agreement of Purchase and Sale itself. In other words, the contract is the difference. The contract in the purchase of a resale home is one your real agent will go over with you and one that has many traditional answers pursuant to the law that has developed around that Agreement.

When you purchase from a builder, you are purchasing pursuant to the terms of a Builder’s contract. This is usually a one-sided Agreement and not one that the Builder will negotiate at great length. However, there are some items in a typical Builder’s contract that the Builder may very well negotiate. These are items that need to be discussed with your lawyer.

A term should be added to the Agreement between a Purchaser and a Builder that states that the Agreement is conditional upon approval of the Purchaser’s solicitor within five business days of the date of acceptance of the Agreement and delivery of the Agreement back to the Purchaser. There should be no additional terms to that condition such as allowing a review of the Agreement by the solicitor for the Purchaser with the exception of financial terms. It is these financial terms that your lawyer does want to look at.

Pursuant to the terms of the Builder’s contract, the Builder will be passing on some, if not all of the following:

  • The enrollment fee for the TARION
  • The cost of installation of a water meter
  • The cost of installation of a hydro meter
  • The cost of the boulevard tree (sometimes called landscaping)
  • Driveway paving
  • Damage deposit
  • Levies

All of these items can be identified by the representative of the Builder during the initial discussion so that you will know what the costs are. However, very often that is not the case and it is necessary for your lawyer to review those costs before the Agreement becomes firm. These costs amount to hundreds and, possibly even thousands of dollars and it is important that a Purchaser understands the obligations that are being taken on pursuant to that contract.

There are other terms of the contract that also need to be reviewed, such as the rights of the Builder to move the date of closing forward and, more commonly, the rights of the Builder to move the closing date backward pursuant to the terms of TARION.

We very much encourage Purchasers of new homes from Builders to have the Agreements reviewed by us prior to the Agreement being finalized.

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