Buying a condo unit during the pre-construction phase may seem like a straightforward proposition. The future unit is purchased from the architectural drawings on the developer’s sales site. However, in real life, buying a unit before it is built can be anything but simple.
Developers often redesign unit layouts as they go along, as a result of changes needed during construction. In addition, they draw up the purchase contracts in your favor. For example, if the complex is late in completion, the buyer is forced to accept delays or occupy the unit while the complex is still awaiting occupancy permits for units that may still be under construction.
Unsuspecting buyers could also become victims of developers selling them units in the early stages where they still own more than 51 percent of the condo project. Over time, developers may not be able to sell the rest of the units.
A condo that cannot attract new buyers may experience a rapid decline in the value of its units. Realizing that there was no longer demand for their units, developers can resort to renting out unsold units, lowering overall unit values.
Buyers are advised to consult an experienced attorney and include their own terms in the purchase contracts. By specifying a fixed completion date, buyers can position themselves to get their deposits back if the developer miscalculates the completion time. The completion time must be determined by the buyer. I strongly suggest another contingency where the proceeds from the sale of the unit, along with its deed, are held in escrow by the developer’s attorney, until such time as the developer sells at least 51 percent of the units to buyers. of individual units.
Until that time, the unit buyer must pay occupancy fees to the developers, equal to the monthly maintenance fees plus the monthly advance mortgage payment. Such an arrangement would provide that after the expiration of a specified time, buyers would be entitled to a refund of their deposits and / or proceeds from the sale, in cases where the complexes were not completed on time, or respectfully, where the 51 percent of the complex is not ‘It is sold to the other shareholders. Such an arrangement would help protect the values of units already sold. Avoid any purchase where the developer is unwilling to agree to your terms, otherwise you may put yourself at the developer’s mercy.
Another thing to keep in mind is the condo maintenance fees. They are guaranteed only for the first year of operation since the time unit owners take control of the complex. Developers often calculate their starting budget on the lower end to make condo units more attractive to buyers.
Almost as a rule, in the second and third years after the majority of unit owners take over the complex from the developer, unit owners receive considerably higher monthly maintenance fees to cover developer cost overruns. . Buyers should assume and expect that there will be an increase in maintenance fees from the first year onwards, following the completion of a new condo.
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Be wary of contracts that require you to purchase the condo unit even if the completion of the construction of the entire complex is delayed.
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When buying pre-build, expect higher maintenance fees than originally calculated by the developer.
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Check the reputation and history of the developer and builder before buying.
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