What if you have second thoughts after buying a new condominium?

In Buying a New Condo…Am I Protected? we discussed the Tarion New Home Warranty, which is intended to protect new home buyers from defects in materials and workmanship; more specifically, we reviewed the different deficiencies covered under the warranty, how much it costs, who pays for it and the property types that are eligible.

The Tarion New Home Warranty is only one of several protections in the Province of Ontario that help safeguard the interests of consumers as they navigate the new home buying process.  Another is the 10-day rescission period…

What If You Have Second Thoughts After Buying a New Condominium?

Let’s say that after a grueling search, you finally find the condominium that’s right you, you strike a deal with the developer, make the necessary financing arrangements with the bank, and sign on the dotted line.

What happens if you have second thoughts?  What if you decide you want to back out of the transaction?

The Condominium Act, 1998, which is legislation in the Province of Ontario that regulates how condos are sold, formed, and governed, offers specific protections to buyers of new condominiums.  The Act states that a buyer is entitled to a 10-day rescission period during which they can cancel or rescind the purchase.

The intent of this part of the Act is to provide buyers a reasonable amount of time to review lengthy and often complicated builder contracts so that they can make a fully informed decision.

There are a number of important facts about this rescission or “cooling off” period that all new condo buyers should know:

1.) The clock on the 10-day period starts from the time a buyer receives a copy of the fully signed agreement of purchase and sale or the disclosure statement, whichever is later.

2.) If a buyer decides to exercise his/her right to terminate the contract, he/she must give written notice of his or her intention to rescind during the 10-day period.

3.) A buyer does not have to provide any specific reason or explanation for rescinding the contract.

4.) If a buyer exercises his or her right to terminate the transaction, the developer must refund any deposit funds plus any interest that may be payable.

5.) The “cooling off” period only applies when purchasing a new condominium directly from a developer.

Once the 10-day rescission period has expired, the transaction is firm, and the contract is legally binding.  However, the Act does allow for rescission in one other circumstance: where there has been a material change (or a series of changes) to the condominium project, or where there is a material change to the information that is set out in the disclosure statement provided by the developer.

Under the Act, a material change is defined as “a change that a reasonable buyer would objectively regard as being so sufficiently important to his or her decision to buy the unit, that he or she would not have entered into the contract if the disclosure statement had originally revealed the changes.”

Some material changes are obvious.  For example, where you believe that you’re buying a new condominium with a balcony, and later learn that the balcony has been removed from the design.  However, there are many other, less obvious examples of material changes, including:

-certain changes to the budget
-changes in the amenities
-changes to the percentage of units that the developer intends to lease

Whether you cancel a new condo purchase during the initial 10-day rescission period or in response to a material change, you are entitled to a refund of all deposits paid to the developer, plus interest.  Interest is calculated at 2% below the Bank of Canada prime rate, and runs from the date that the developer received the money to the date it is refunded.

I hope you found the final instalment of the Condo Millionaire series entertaining and informative.  In the event that you have any questions about the article, are looking for assistance buying or selling real estate, or have friends or family members looking for a referral to a professional Realtor, please don’t hesitate to get in touch.  I’d be happy to help in any way that I can.